'We will not accept two classes of pension scheme member' – TPR
Friday 16 December 2016
The Pensions Regulator (TPR) has underlined its determination to drive up standards of governance and trusteeship to ensure all members and scheme sponsors can reap the benefits of good stewardship.
TPR has today published a response to its 21st Century trusteeship and governance discussion paper (PDF, 105kb, 20 pages). The paper was published by TPR to stimulate a debate with industry on how the governance and administration failings identified in its research can be addressed.
During 2017, TPR will undertake a targeted education and enforcement drive. It will seek to make its expectations clearer about what ‘good looks like’ and use data to more effectively target its communication approach as well as tailoring its methods to the scheme size, type and compliance history.
Andrew Warwick-Thompson, Executive Director for Regulatory Policy at TPR, said: “We know there are many highly experienced and skilled trustees, and some schemes are managed very effectively. However, too many occupational pension scheme members and sponsors are suffering financial detriment from poor stewardship.
“There are some trustees who are not responding to our guidance and calls for higher standards. We are not prepared to accept two classes of scheme member – those that benefit from good governance and administration, and those that do not.
“In 2017 we will set out clearly the higher standards we expect of a professional trustee and define what we mean by a ‘professional trustee’. Further, recognising that the most effective boards have a diversity of skills, we will continue to encourage and support lay trustees through the development of the Trustee toolkit and targeted guidance and self-help tools.
“We will also seek to encourage employers to allow lay trustees the time off for preparation and board meetings, and to provide the additional financial support needed for them to receive effective training.”
TPR received 74 responses to the 21st century trusteeship and governance discussion paper, from lay and professional trustees, chairs, pension managers, public service board members, advisers, consultants and industry stakeholder organisations. A variety of opinions are expressed in the responses, but there are also some common themes, including:
- There was broad consensus among respondents that good governance is vital and widespread support for TPR’s increased focus on driving up standards.
- While most respondents supported the idea that the chair of trustees should have demonstrable leadership skills, few respondents thought that minimum qualifications for the chair or membership of a professional body would be helpful.
- Respondents highlighted regular evaluation, assessment and reporting as ways to focus trustees on achieving good governance and asked for simplified, streamlined and consolidated guidance for trustees.
- There was little support for mandatory qualifications. Most respondents felt that the knowledge and skills of the board as a whole, with the support of advisers and other service providers, should be considered, rather than the knowledge or skill of a single individual within the collective.
- Where there are schemes that don’t reach expected levels of governance, most respondents thought a targeted approach by TPR towards those particular schemes would be better than placing additional burdens across all schemes.
TPR is already treating basic trustee duties of scheme governance as a priority and is taking a tough stance on scheme returns and Chairs statement enforcement, imposing fines when schemes do not comply. TPR will clarify its expectations of trustees, and what its enforcement action will likely be when these standards are not met.
“If trustees are unable to get even these basic legal duties right, it is likely to be symptomatic of more serious failings, and in some cases fraud”, Mr Warwick-Thompson added.
“We have a range of powers already – the appointment of an independent trustee or skilled person, improvement notices, and the suspension or prohibition of a trustee. We also believe that in some circumstances scheme consolidation may be the most appropriate strategy and we are open minded about the longer-term solutions, which is why we are so keen to engage with stakeholders and the wider industry.”
TPR will launch its education drive in Spring 2017 and will continue to engage with industry, inviting thoughts and comments on any aspect of pension scheme governance at firstname.lastname@example.org.
- A full list of the discussion questions is included in Appendix 1 of the response.
- A full list of the respondents is included in Appendix 2. TPR is grateful to everyone who responded to the discussion paper.
- The response provides a high-level summary of the responses TPR received and explains what it intends to do next.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
Tim Marks 01273 662092