A recent research study from The Pensions Regulator (TPR) in the UK found that despite some improvements across the UK pensions industry, many trustee boards are failing to meet their duties.
01 Jan 2017
Governance standards still need to be raised
While the research discovered that improvements in governance standards had taken place in larger schemes, many small or medium-sized schemes had major gaps in their governance standards across several areas.
The research found that for the smaller schemes, gaps in standards included:
- tendency to display poorer governance standards, for ecample they place less focus on training arrangements, regular board assessments, effective internal controls and oversight of third parties
- many small and medium DC schemes are not meeting standards around administration (e.g. ensuring prompt and accurate transactions), investments (setting appropriate investment strategy for the default fund) and value for members (assessing quality of services provided to members)
- significant issues also remain among DB schemes, in particular around integrated risk management and fair treatment of the scheme
The TPR has a major initiative planned, '21st Century Trusteeship - raising the standards of governance' designed to improve governance but has also stated it will be stepping up regulatory action in cases where trustee boards fail to meet minimum legal standards.
Facing the governance challenge
Scheme representatives have much to contend with, with increased regulation coming on top of managing investment performance in challenging economic conditions and demands for greater transparency from stakeholders and members.
These challenges are magnified in the case of small to medium-sized schemes which typically need more support from their service providers as they have fewer resources, in-house skills, and buying power – our view is that we feel the market should be providing them with more support.
In order to meet the numerous challenges these schemes face, service providers need to be able to offer accurate, reliable holistic reporting across investments, costs, performance, and risk in order to deliver added-value to these schemes.
We firmly believe that enhanced governance typically leads to better outcomes for members and that a service provider's role is to always look at things from the scheme’s perspective – thereby enabling the scheme to be in control.