Pension governance alarm bells

We were running our new client’s very first pension governance meeting. As we went through the numbers, they became concerned. The company’s contribution levels just didn’t match what they had expected to see.

Alarm bells started to ring. We agreed to look at their contribution levels after the meeting. That was when we discovered that for several years, they’d been deducting employee contributions from gross pay, whereas they should have been deducted from net pay. This had serious implications with regard to the tax relief that had been incorrectly granted.

Luckily, there’s a happy ending. Not only did we identify the problem, but we were able to liaise with HMRC and the pension provider to get things sorted out promptly. But if the error hadn’t been uncovered in that governance meeting, it’s anybody’s guess how long this issue would have carried on.

As I explained last week, regular governance meetings are vital to make sure your pension scheme is well-run – as vital as board meetings for your company, or an audit of your finances.Governance is a crucial mechanism to catch mistakes early and ensure that your pension scheme is delivering the best possible value.

Good pension governance

So what exactly should a good governance meeting cover? And how do you get the most out of it?First of all, make sure the right people are there. As well as HR, you need a good mixture of staff representatives and senior management. This helps ensure that the meetings and action points are taken seriously and that there is a high level of ideas.

Having a good mix of staff in the pension governance meeting also helps improve engagement with pensions throughout your business. We find that employees who attend these meetings feel empowered because they are part of the decision-making process. They then cascade information throughout the company, and when your staff can see that you care about their pension and manage it carefully, they tend to care more, too.

Five questions to consider at every pension governance meeting:

1. Performance
How is your scheme doing?
Don’t just look at the bottom-line figures –consider whether you are getting value-for-money and benchmark against other providers. Most importantly, think about whether the members of your scheme will have enough when they retire!

2. The quality of your scheme
How much are you contributing? How is it structured? 
Again, benchmark the quality of what you do against the rest of your sector, as well as against government recommendations.  If you want your scheme to attract and retain staff, you can’t fall behind in what you contribute, or let the structure of your scheme become outdated. You need to lead the pack. 

3. Marketplace trends
What are the changes in pensions that you need to be aware of? Which new regulations are going to affect you?
Stay up-to-date to avoid getting caught out by the regulator and falling behind your competitors.

4. Demographics
How are staff interacting with the scheme? How many people are opting in, and how many are opting out?
This will give you an indication of how valuable they perceive your scheme to be, and therefore whether you are getting the maximum benefit from your investment.

5. Communications
How are you communicating information around pensions to staff? How successful are those efforts?
A couple of weeks ago, I mentioned a company which had painstakingly built a pensions intranet, only to discover that at the end of the first quarter, just three people had logged in. Because this was uncovered relatively quickly at the governance meeting, it meant that immediate action could be taken to get people to the site.


lightbulb-01Top Tip 
 
                    An action plan with concrete steps is all what good governance meetings should                    include

Pension governance meetings don’t guarantee that mistakes are never made. But they will help ensure that they are caught early. Given the risks involved – fines, reputation, your employees’ future and even your own career – isn’t that worth its weight in gold?

 

Posted by Steve Butler

Topics: Pension Governance

pension-governance
Questions

Ask The Experts

Want to get in touch?
Just fill out the form below and we will be in touch shortly.

workplace-rocket

Next Generation Savings

Changing Workplace Savings Behaviour for the Better

discover
workplace-bullseye

Consultancy

We provide consultancy services to employers and trustees on contract-based and trust-based schemes, including master trusts. Our proposition encompasses governance, investment, administration and communications.

more
workplace-governance

Governance

Establishing and governing the ideal workplace pensions and savings for your employees can be complex and time consuming. That’s where we come in.

Monitor
workplace-education

Engagement & Education

We use innovative communication channels and modern technologies to help educate, engage and inspire employees across a range of financial topics.

 

Find out more
workplace-deckchair

Retirement

With greater choice and freedom in how and when individuals are able to access their pension fund, there is now an even greater need for early education and advanced planning. Find out how we help.

Discover
workplace-graph

Investment

Our investment research division analyses and rates over 18,000 DC investment funds. The insight we have enables us to support your investment objectives, making sure they're on track to deliver.

track
workplace-health-risk

Health & Risk

Our health & risk service provides tailored combinations of cover and cost to exactly match each employer's requirements, helping you get best value for your benefits spend.

Discover