Out-Law News | 10 Jul 2019 | 10:07 am | 2 min. read
The plans, which have been published for consultation, could lead to "fewer, but better governed" schemes over time, according to David Fairs, TPR's executive director of regulatory policy.
Topics on which TPR is seeking views include how to improve diversity on pension scheme boards; whether sole trustees are able to run pension schemes appropriately; and whether to introduce mandatory knowledge requirements for trustees and require an accredited professional trustee on every pension scheme board. It is also keen to understand how barriers to consolidation can be removed.
The consultation closes on 24 September 2019.
Governance is such a hot topic because it is the foundation for ensuring good member outcomes and producing a well-run scheme.
Pensions expert Michael Jones of Pinsent Masons, the law firm behind Out-Law, said that TPR was "now taking an openly active approach to drive consolidation and address sub-standard scheme governance".
"This consultation signals a clear direction of travel towards consolidation of both the DB [defined benefit] and DC [defined contribution] market and further strengthens the case for the professionalisation of trustee boards," he said. "Governance is such a hot topic because it is the foundation for ensuring good member outcomes and producing a well-run scheme."
"The consultation brings several key themes onto trustees' agenda: how to improve and evidence trustee knowledge and understanding; how to encourage diversity on boards; and whether the case for appointing a professional trustee is now too strong to ignore. It also brings into focus the role of the chair, and how a good chair is integral to promoting a trustee board with a divergence of ideas, opinions and backgrounds so that all members are adequately represented and the industry continues to improve, innovate and attract new business," he said.
In 2016, TPR set out its vision to modernise trusteeship and improve scheme governance in its '21st century trusteeship' discussion paper. That paper, which made a number of practical recommendations, was well received, but according to TPR "there remains a subset of disengaged trustees that are either unable or unwilling to take action to improve scheme governance, particularly in relation to small and micro schemes".
Trustees and pension scheme board members have a statutory duty to ensure that they have sufficient training in, and knowledge and understanding of, the law relating to pensions and trusts, and to familiarise themselves with certain scheme documents. However, less than a quarter of 'small' DC schemes with fewer than 100 members, and less than a fifth of 'micro' DC schemes with fewer than 12 members currently meet these requirements, according to TPR's latest annual survey of DC schemes.
Larger schemes were far more likely to meet these requirements, as well as generally being able to offer better value for money to members through economies of scale, according to TPR. Authorised master trusts offer a route to consolidation for smaller DC schemes, while TPR is currently working with the Department for Work and Pensions to better support the consolidation of DB schemes into 'superfunds'.
"We believe all savers should be in well-run schemes that deliver good value," said David Fairs of TPR.
"The trustee model isn't broken, but it does need to be greatly improved. There is stark evidence that the current system doesn't work for all and there is a clear disparity between the experience of savers in well-run and badly-run schemes. If trustees cannot meet the standards we expect, we believe they should wind up and consolidate savers into a better run scheme," he said.
10 Dec 2018
17 Sep 2018