Badly-run pension schemes must ‘improve or consolidate', says TPR
The Pensions Regulator (TPR) is consulting on the future of trusteeship, in a bid to raise standards and reduce the number of poorly governed pension schemes
8 Jul 2019
The level of governance at some schemes is so poor that TPR says ‘badly-run schemes should improve or consolidate’.
David Fairs, executive director of regulatory policy, analysis and advice at TPR, said: ‘We believe all savers should be in well-run schemes that deliver good value. This paper outlines how we are considering changing the way we regulate to achieve that.
‘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.’
The 30-page consultation paper outlines the problem of badly run pension schemes and considers how the trustee model can be made more effective.
In particular it poses questions to the industry about how to improve and evidence trustee knowledge and understanding, how to encourage diversity on boards, the role of accreditation and whether sole trustees are able to govern effectively.
Among the issues under consideration are whether there should be an accredited professional trustee on every board, and whether a legal requirement should be brought in for trustees to meet minimum standards of knowledge and understanding and ongoing learning. The consultation will also look at the ways in which barriers to consolidation could be removed.
Fairs said: ‘Despite our work, including through initiatives like 21st Century Trusteeship, there is still a subset of disengaged trustees who either refuse or are unable to improve standards in their schemes.
‘This clearly is not fair for savers - we believe that everyone saving for a pension should be in a scheme with excellent standards of governance and which is providing good outcomes for savers.’
Ian Bell, head of pensions at RSM, described the consultation as 'very timely', citing an RSM survey published earlier this year which found that 62% of trustee respondents felt under more pressure than a year ago, citing concerns over scheme funding, the time it took to carry out the role and the challenges of meeting regulatory demands.
'There has recently been a drive for greater professionalisation on trustee boards and we see this trend continuing,' said Bell. 'Indeed, 70% of the pensions professionals surveyed thought that lay trustees will no longer have a place on pensions scheme boards in 10 years' time. It will be interesting to see where this consultation ultimately leads.'
The consultation closes on 24 September 2019.