This blog may be of interest to:

  • Employers and Trustees supporting occupational pension schemes
  • Employers who have been involved in mergers and acquisitions, as we are seeing The Pensions Regulator taking steps for employers to take ownership of these 'stranded schemes'

workplace-riskOn 1st August The Pensions Regulator published the results of its annual defined contribution (‘DC’) survey. The Regulator has reported that most small trust-based pension schemes are failing to meet all the required standards of governance and trusteeship.

The Regulator defines small registered pension schemes as those with between 12 and 99 members and has reported that only 1% of such schemes are meeting the required governance standards. Micro pension schemes are those with between 2 and 11 members, and only 4% of such schemes are reported to be meeting the necessary governance standards.

This is clearly unacceptable, and the Regulator’s findings should prompt all occupational pension trustees and sponsoring employers to check carefully that they are complying with the current rules and regulatory guidance.  

Are you meeting the necessary standards?

contractThe regulations and standards affecting DC pension schemes also include the DC assets and insurance policies within defined benefit pension schemes. It is crucial that the trustees of all types of occupational pension schemes ensure that they are meeting the necessary standards in governing their pension scheme effectively, especially since new disclosure rules introduced in 2018 will affect this year’s Chair Statements. The new rules are designed to improve the standard of Chair Statements, with much more detail needed around the disclosure of costs and charges.

There is also a new standard effective from October 2019 in respect of the way schemes must report on their consideration and use of ESG investments: those which meet the necessary standards in respect of the environment, sustainability, and corporate governance.

Here at Punter Southall Aspire we are supporting our clients with additional services in respect of the new trustee duties.

There is a view in the pensions sector that the Regulator’s findings show that large pension schemes are better run and are a safer place for pension members. Whilst there is evidence that many small schemes are failing to meet the current governance standards, it is certainly possible for them to comply and provide good value for their members, given the correct advice, focus and dedication.

However, the time and cost of complying with current and proposed rules is undoubtedly a significant task for trustees which many small schemes may feel is disproportionate. Such schemes may wish to consider closure – if this is you, Punter Southall Aspire has a dedicated team of specialist pension consultants to advise and assist with scheme closure projects, and selection of a sound and robustly managed replacement scheme, on an independent basis.

If you’ve read this far as a trustee of a larger scheme, you may be thinking this doesn’t apply to you.  Not so.

Whilst the survey does indicate that large schemes are generally better run than small schemes, this isn’t always the case and the trustees of large schemes should not be complacent. There remains evidence that the DC components of large schemes are often overlooked in favour of the more obvious risks of defined benefits. The trustee’s role in providing good value and good governance for members is crucial and all aspects should be taken extremely seriously.

Both the Pensions Regulator and the Department for Work and Pensions have recently indicated a wish for more consolidation of small schemes. The decision to close an occupational pension scheme and consolidate rests with either the trustees or the sponsoring employer, both of whom need to consider alternative options if the cost of complying and demonstrating good governance is becoming a burden. Meanwhile, they must ensure that their current obligations and duties are being met.

We would be very pleased to help you with any impending review projects, or to provide a second opinion on any occupational pension scheme that has cost, value, governance or compliance issues on the horizon.

For more info, contact us on 01904 236 400 or by email.

Posted by Mark Bowen

Topics: dc pension schemes, trust-based, occupational dc

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