‘21st Century Trusteeship’ was developed on the back of The Pensions Regulator’s (TPR) research identifying that many schemes were not being run to their standards. This was particularly true of smaller and medium sized schemes where resources to support trustees are less available.
So, what is new?
Well, actually nothing. Most large pension funds were already following very good governance practices. Legislation already exists for many governance areas expected by TPR.
Why is it so important?
Doing the right thing, in the right way, means that trustees set clear goals and timescales, understand and manage risk, communicate clearly, and get the maximum from available resources and advisers; this results in better outcomes for all.
What needs to be considered?
In line with TPR’s suggestions, issues and questions a trustee board should consider are as follows:
> Governance, roles and strategy
+ Are you reviewing scheme operations on a regular basis?
+ Is record keeping and access to information adequate?
+ Are all responsibilities clear and roles defined?
+ Is there someone who oversees all regulatory and legislative activity, ensuring compliance?
+ Governance and administration policies: do you have and review these?
+ Is your committee structure appropriate?
+ Do you know what activities are delegated?
+ Do you have a review cycle in place?
+ Strategic business plan (separate to an event calendar): do you have one?
+ How do ensure things do not go off course?
+ Do you apportion agenda time and governance to your strategy?
> Training, skills and advisers
+ Do you regularly assess your need for training and its plan?
+ Is there a proper induction process for new trustees?
+ Do you have the correct skills (both technical and soft), and diversity on your board?
> Risk and conflict of interest
+ Do you understand your risk management framework and where responsibilities lie?
+ Is time spent in the right proportion on thinking, challenge and discussion of risk, and maintaining the documents capturing that process?
+ How do you capture the risks that are less easy to measure e.g. governance, cyber and data security?
+ Do you have policies in place for managing conflicts, anti-bribery, gifts and entertainment, and anti-money laundering?
+ Are conflicts of advisers considered?
> Meetings and decision making
+ Do you receive the right information in a timely manner?
+ Do the agendas and papers allow you to focus on the business of making decisions?
+ Do you and your board plan far enough in advance to get the most out of meetings?
+ Does everyone on the board feel able to contribute and speak their mind?
+ Is your chairman effective?
+ Is the use of advisers at meetings effective?
> Value for members
The law requires trustee boards to calculate at least annually the charges and transaction costs, to which defined contribution (DC) members’ funds are subject; and to assess the extent to which they represent good value for members. The result of the assessment is then reported in the annual Chair statement.
Whilst there is currently no legal duty on defined benefit (DB) schemes to annually assess value for members, TPR recommends trustees do so to help ensure good member outcomes.
The DWP’s White Paper (published March 2018) proposes that in the future trustee Chairs of DB schemes produce an annual Chair’s statement and submit it to TPR with each valuation. Trustees should have this potential future disclosure on their radar.
By Christine Kerr
Senior Pension Management Consultant – Barnett Waddingham