- Achieving well-run pension schemes a key priority for the PLSA
- PLSA welcomes regulatory scrutiny of scheme governance and administration
- Small, good quality schemes must be given the regulatory space to thrive
It is right that pension schemes deliver the highest standards of governance, but regulatory interventions must not disproportionately burden funds that are engaging with the regulator and achieving good governance standards, the Pensions and Lifetime Savings Association (PLSA) has said.
Responding to The Pensions Regulator (TPR)’s consultation on the Future of Trusteeship and Governance, the PLSA said it welcomes TPR’s decision to scrutinise scheme governance and administration over the next 12–18 months. It warned, however, that any assessment must avoid piecemeal targeting of specific issues in a way that has unintended consequences or duplicates existing demands on trustees.
The PLSA submits there is a difference in the scale and type of challenge presented by those schemes which do not engage with regulators or advisers and where there is little to no actual governance taking place, and those schemes which are engaging but need to improve to ensure they achieve quality standards.
Therefore, TPR should focus on targeting disengaged schemes rather than putting new obligations on all schemes: there are substantial parts of the market which are already delivering high quality provision.
As part of this focus, TPR should consider whether it is making sufficient and sufficiently targeted use of its existing powers to lift scheme governance standards.
KEY POINTS IN THE SUBMISSION:
- Central database of Chair’s statements: Greater accountability to scheme members and civil society more generally is key to improving governance outcomes. We believe that a proportionate approach to ensuring that trustees are held accountable for the training they have or have not undertaken is for there to be a central, accessible and easily searchable database of all schemes’ Chair’s statements.
- Trustee board diversity: We support new reporting requirements on the steps that trustee boards are taking to become more diverse. It is important that this is made publicly available and given the momentum for change, focuses on the work being undertaken now as opposed to longer-term outcomes.
- Professional trustees: We do not think that it should be mandatory for every scheme to engage a professional trustee. The market and regulatory environment for professional trustees is currently undergoing significant change, and time must be allowed for these changes to bed in and for standards across all professional trustees to be raised, before such a step is taken. We believe there is scope for TPR to assess how it makes use of its current power to appoint an independent trustee to schemes where it has concerns.
- Consolidation: We believe that TPR must be clear about distinguishing between poor- and well-performing smaller schemes. This is necessary to design regulation which allows well-run schemes of whatever size to thrive and which does not impose a disproportionate regulatory burden on those schemes which have fewer resources.
- Executive support: One area which we believe is worth highlighting for TPR’s consideration is that of executive support (either external or, in particular, internal). We do not believe that in its work on governance to date, TPR has sufficiently explored how scheme trustees and decision-makers ensure a well-resourced and efficient executive looks like across a variety of scheme sizes and types. We would also urge TPR to undertake research into what the executive support landscape looks like as there is little data on this issue.
- Sole trustees: We would urge TPR to undertake further research into the nature of issues (if any) with sole trusteeship before it considers regulatory intervention in this space.
Caroline Escott, Policy Lead: Investment & Stewardship at the PLSA, said: “Pension schemes are currently dealing with a significant amount of regulatory and industry change. Any new regulatory requirements must therefore be purposeful, proportionate and pragmatic. In particular, they must allow good schemes of all shapes and sizes the space to continue to thrive.
“They must also be undertaken as part of a clear-sighted and coherent assessment of the bigger issues around scheme governance, which we hope will form an explicit part of TPR’s thinking on this area over the coming months.”
The PLSA’s consultation response builds on its previous work on governance including in our Hitting the Target and DB Taskforce programmes of work, our paper on Good Governance: How to Get There and extensive engagement with the full range of our membership on the issues raised in this paper.
Achieving well-run pension schemes a key priority for the PLSA, as identified in the PLSA Policy Board’s strategic four-year work plan.
Read the PLSA’s full submission here.
Mark Smith, Senior PR Manager
020 7601 1726 | [email protected]k
Steven Kennedy, PR Manager
020 7601 1737 | 07713 073024 | [email protected]