The Pensions Regulator

Governance responses show support for regulator's approachGovernance responses show support for regulator's approach

Ref: PN07-16
24 October 2007

The Pensions Regulator has today published a report of the responses received to its governance discussion paper.

The regulator aims to promote better governance of work-based schemes, providing education, guidance and support to help bring parties to a similar level of good practice and avoid the risks and costs that can result from poor governance.

The responses showed that:

• there is support for the active promotion of governance by the regulator;
• the regulator should set out principles and avoid more detailed prescription;
• there is support for the regulator to help trustees understand how to meet the requirements of legislation;
• the regulator should recognise that controls and processes for governance need to be proportionate to the related risks and individual circumstances;
• governance tends to be more problematic for smaller schemes;
• there is a considerable diversity of views on the regulator's role in relation to contract-based schemes.

The regulator remains of the view that the responses do not require a change to our fundamental approach, but that we will take on board any concerns expressed and consider these during further development of our proposals.

Editor's notes

1. Good governance is essential to both DC and DB schemes. The regulator's aim is not to increase our powers but to use the ones that we currently have. We are not planning to increase the burden on trustees, employers and advisers but to provide education and support to enable a similar understanding on running work-based pension schemes, and to encourage good practice resulting in raised standards where appropriate. Intervention is a last resort where necessary.
2. On 25 April 2007 the Pensions Regulator issued a document entitled 'The governance of work-based schemes: Discussion paper,' setting out our views on the main proposals on how these priorities could be addressed.
3. We invited comments from interested parties, and the consultation period closed on 13 July 2007. We received 40 responses from a broad section of the pensions industry including representative bodies, insurers, pension professionals and third party administrators as well as trustees and pension managers.
4. The Pensions Regulator has published the final module of its trustee toolkit, Running your Scheme, which focuses on governance. It has also produced a code of practice and scope guidance which interprets the requirement for trustees to have knowledge and understanding of the law relating to pensions and trusts. Consultation papers relating to conflicts of interest guidance and winding up guidance will be published later this year.
5. The Pensions Regulator is the regulator of work-based pensions in the UK, with wide-ranging and flexible powers under the Pensions Act 2004. The powers of the Pensions Regulator include the ability to:

• collect more detailed scheme information;
• issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
• freeze a scheme that is at risk, while the regulator investigates; and
• prohibit trustees who are judged not fit and proper to carry out their duties.
• The Pensions Act 2004 also imposes a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator.