This week the Pensions Regulator has issued a bulletin[1] summarising its response[2] to the Defined Contribution (DC) and Defined Benefit (DB) scheme governance surveys which were carried out in Spring 2017[3].

The surveys form part of the Regulator’s recent focus on scheme governance and the response highlights its intention to take targeted enforcement action against those not meeting requisite standards.

Survey Results

The survey results show improvements in governance with larger schemes on the whole tending to be better run than smaller arrangements. The Regulator notes that the results for many small and medium schemes are “disappointing” with such schemes showing a tendency towards poor governance standards.

There is increased understanding and compliance with the principles of the Regulator’s codes. However, the Regulator is concerned that many small and medium DC schemes and a larger number of DC schemes used for auto-enrolment are not meeting administration, investment or value for member standards.

The Regulator is also concerned that there remain significant issues amongst DB schemes, particularly around integrated risk management and compliance with the “fair treatment” principle.

Integrated risk management requires trustees to adopt an approach to funding in a way which integrates employer covenant management, investment and funding risk. The “fair treatment” principle is one of the nine principles contained in the DB funding code. It requires trustees to ensure the scheme is treated fairly amongst competing demands on the employer consistent with equivalent creditor status.

Overall, whilst many trustees are managing schemes effectively, the Regulator is concerned about those schemes which it has identified as failing to meet “basic standards” of “good governance”. The Regulator intends to take a strong stance on such schemes.

Action – DC Schemes

The Regulator is going to launch a DC communications programme aimed at trustees, advisers and employers covering the basics of good governance. It will focus on key actions and give examples of poor, good and best practice and provide additional assistance in the form of aids such as board assessment templates and activities.

Existing guidance will be streamlined and the Regulator’s website is going to be improved. Finally, prompted by the varying quality of chair’s statements which the Regulator has seen it is also going to produce a guide on preparing a statement to assist trustees.

Action – DB Schemes

The Regulator will continue with a stricter approach where valuations are submitted beyond the statutory 15 month deadline especially where delays could have been predicted or there has been a lack of engagement. It will also undertake “more proactive casework” with fair treatment being a key focus area, especially where recovery plan end dates are unnecessarily extended or where shareholder payments are prioritised when the employer covenant is constrained.

The Regulator has recently issued a number of press releases concentrating on scheme governance and standards of trusteeship. It intends to take a tougher approach where schemes are failing to meet requisite standards. We would encourage trustees to review governance policies and procedures to ensure that schemes are meeting required standards and to revise these where necessary to avoid unwanted Regulatory intervention.

This blog post was written by Rachel Stevens. For further information, please contact:

Michael Collins, partner, Pensions

T: 0121 234 0236 





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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.