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The Pensions Regulator consults on the future of trusteeship and governance

The Pensions Regulator consults on the future

The Pensions Regulator issues a consultation paper on the future of trusteeship and governance.


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The Pensions Regulator (tPR) has issued a consultation paper on the future of trusteeship and governance. This concerns both defined benefit and defined contribution pension schemes. The paper summarises key aspects of tPR’s recent research into governance arrangements, with proposals reflecting its finding that there is still a large number of schemes, especially small DC schemes, failing to meet adequate standards.

Key themes in the consultation paper are:

Trustee knowledge and understanding, skills and ongoing learning and development

The paper considers whether those managing schemes have the right knowledge, understanding and skills, and whether there should be a legislative requirement to demonstrate a minimum level of knowledge. TPR suggests that trustees should be able to demonstrate a minimum level of annual ongoing learning through formal CPD-type training and seeks views on what that level should be.

TPR will actively encourage consolidation in schemes where trustees persistently fail to meet expected standards.

Scheme governance structures for effective decision-making

Citing evidence that diverse groups are more effective at making decisions, the paper looks at ways to improve trustee board diversity and to ensure that boards have the right mix of skills, knowledge and understanding for running the scheme. Whilst it rejects the notion that any form of quota system should be applied, it does propose a new legislative requirement for schemes to report on the steps they are taking to ensure the pension board has the necessary diversity of skills and reflects the membership of the scheme.

TPR states its aspiration to see an accredited professional trustee on every board and, going beyond that, questions whether appointment of a professional trustee should actually be made compulsory.

Regarding sole trustees, however, tPR expresses some concerns – notably that employers may believe a sole trustee arrangement will help them to negotiate an employer-friendly funding agreement but also that sole trusteeship loses the advantages of board diversity and saver representation. The paper seeks views on this.

Driving DC scheme consolidation

Schemes that fail to achieve adequate standards of trusteeship and governance will face enforcement action or be actively encouraged to wind up. To help achieve this, tPR is considering ways to remove barriers to consolidation, such as enhanced characteristics and guarantees (e.g. with-profits funds and guaranteed annuity rates), and some practical issues for very mature schemes. Initially, however, it will focus on encouraging consolidation in failing schemes that do not have these characteristics.

TPR supports the DWP’s proposal for schemes to have a triennial statement on whether they should consolidate into a larger scheme and suggests that best practice would be for schemes to consider this at least annually, as part of their ‘value for members’ assessment.

The consultation closes on 24 September 2019.

For further information please contact:

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