New tools could help trustees stay on the right side of the regulator when it comes to administration, argues Sara Benwell
The Pensions Regulator has shown that it is more than prepared to exercise its powers when it deems trustees to have failed in their duties.
Often this occurs when trustees fail to meet deadlines, whether that’s submitting chairs’ statements on time or missing the deadline for scheme valuations.
However, TPR is also keen to drive up standards across the board under its 21st Century trustee initiative.
The initiative is broad and asks that trustees focus on all those areas which promote ‘good value for money for members’.
This includes obvious factors such as costs and investment returns, but two less immediately obvious areas that sit squarely in its sights are administration and record keeping.
What does this mean for trustees?
One outcome for trustees is that they will need to be able to demonstrate – if challenged – evidence that they have appropriate levels of governance over their administration providers.
Trustees must demonstrate that they have appropriate levels of governance
To achieve this, regular assessment is a must. Trustees should be able to show that they have scrutinised their administration and taken action where appropriate.
Where there are issues, trustees should engage with their provider to air these and assess how significant a risk they present to member outcomes.
The next step is to agree corrective action to mitigate any problems.
Fortunately, PASA have released two new tools that may help.
What does good governance look like, and who is responsible?
First up is new guidance, which clarifies who is responsible for making sure administration is up to scratch as well as what good governance looks like.
The guidance is aimed at administrators, trustees and employers managing responsibilities in five core areas - Data, Decumulation, Controls & Processes, Management Information and Transitions.
A real point of concern is a confusion in DC schemes over where accountability for administration governance lies
Kim Gubler, deputy chair of PASA and board sponsor of the DC Administration Governance Working Group, said: “A real point of concern for PASA is a confusion among everyone involved in DC schemes over where accountability for administration governance lies.
”Our guidance sets out clear boundaries of accountability to help alleviate this for everyone… We believe this emphasis on administration will not only make DC schemes more straightforward to run, but benefit member outcomes.”
David Fairs, executive director of regulatory policy at The Pensions Regulator, added: “Good governance means motivated, knowledgeable and skilled trustees with the right structures and processes in place to enable effective and timely decisions and risk management.
“Guidance such as this supports trustees, employers and administrators to work together and ensure that this essential part of scheme management is prioritised.”
Making sure you’ve fulfilled your obligations
The second tool that may help trustees manage this task, is a new administration governance checklist developed by PASA.
The checklist aims to create an easy way for trustees to review their administration function.
It sets out the questions you should be asking to assess the suitability of your provider and highlight any problem areas that need addressing.
As it’s been designed specifically in response to The Pensions Regulator’s governance drive - one would hope it’s a good starting point for meeting trustee obligations.
We encourage trustees to regularly assess their board effectiveness
TPR has given it the seal of approval themselves, which is a good sign that trustees using it will be in a good position to meet regulatory requirements.
Lesley Titcomb, chief executive of The Pensions Regulator, said: “Tools like this provide ways for trustees to assess their current levels of governance and set targets for improvement.
“We would like to encourage trustees to regularly assess their board effectiveness and we welcome initiatives developed by industry to support TPR’s drive to improve governance.”
Fergus Clarke, executive director of PASA, added: “Trustees who are able to check off all points positively can be confident that they are delivering good governance in relation to the PASA Standards of administration and record keeping.”