In July 2019, The Pensions Regulator (TPR) published a consultation paper on the future of trusteeships and governance. The paper outlined a number of key concerns and research findings along with proposals for change. The paper sought input from across the pensions industry and consultation closed on the 24th September 2019.
TPR outlined their vision of the future of pensions in the consultation document:
“Our vision for the future of occupational pensions is one where all savers are in schemes that have excellent standards of governance that deliver good value. Over time we think this will mean having fewer, but better governed schemes in the market.”
The documents itself went on to explore several key themes.
Trustee Knowledge and Understanding
The paper considers whether those who run schemes have the right level of knowledge, skill, and understanding to effectively manage them. TPR suggests there should be a legislative requirement for trustees to demonstrate an appropriate level of knowledge and skill, alongside active consolidation of schemes which fail to meet key standards.
Governance Structures for Effective Decision Making
TPR believes that diverse groups make better decisions and evidence this position with relevant research. The paper explores ways to measure and actively encourage diversity amongst trustee board members. It again, suggests a legislative requirement for trusts to demonstrate their commitment to diversity in order to bring together a wider range of skills and reflect the membership of their schemes. TPR wants to see an accredited professional trustee member on every board and recommends this should be compulsory.
DC Scheme Consolidation
TPR wants to remove barriers to consolidation to make it easier for schemes to merge. This will mean it becomes less complex for schemes which fail to meet the expected standard of trusteeship to merge with other schemes. TPR is in agreement with the DWP’s proposal for schemes to produce a triennial statement to consider whether it would be more effective for them to consolidate into a larger scheme. They suggest that this might become an annual obligation as part of a yearly review process.
TPR is now collating feedback from the consultation and findings gathered from a number of stakeholder events. We now await proposals to be put forward by the regulator and for further talks to begin with the DWP.