In January, the boss of the Pensions Regulator was quoted as saying ‘’We know we can effect change and raise standards in the UK pension industry by speaking out and setting expectations. And this is what we will do in 2016.’’
CBC say that such an attitude is welcome. For more reasons than a short blog can go into now, UK pensions are not in a place where many of us would like to see it. Concerns around the impact of auto enrolment (how many employees of smaller companies will actually join and continue to contribute), defined benefit deficits and the future of defined contributions scheme remain. And let’s not go there with George’s marvellous medicine of potential changes to the tax system.
In the light of all this, what can Trustees actually do to make their members outcomes the best that they can be?
We strongly believe that Trustees and their scheme sponsors need to know where they are going, not only today or tomorrow but in the medium and long term as well. This means that there should be a strong working relationship with Trustees and sponsors, to understand the common ground and equally where they may be a different view. Trustees need to understand where the scheme stakeholders are coming from, whether it is the sponsor or members or advisers. It’s this empathy that is important in developing the relationships which are so important in actually making the Pension Regulators integrated risk management tool work in practice rather than be tucked away in a drawer someplace.
Whilst the integrated risk management tool focussing on employer covenant, investment and funding is primarily designed for defined benefit schemes, we believe that the model applies to defined contribution schemes as well. Whilst there is no funding of a deficit, the level of contributions and investments do have a direct bearing on one of the Pensions Regulators key objectives – value for money. Our view is that value for money applies as much to defined benefit schemes as defined contribution schemes. The employer covenant relates to the sponsors ability to pay contributions to the pension scheme. Monitoring the sponsor’s business and its ability to fund the scheme should be an item on every trustee meeting agenda, and not the one just before people have to dash off for the train.
Trustees of pension schemes need to think about their planning and how to implement the individual tasks within the plan. We believe that this is an essential objective for trustee boards if they are to achieve the Pensions Regulator’s objective of effecting change and raising standards in 2016 and beyond.
For more information about our views on trusteeship please contact us by telephoning 0845 4334 199 or email us at firstname.lastname@example.org