Pensions Regulator Finds Better Governance in U.K. Plans

The survey report said that throughout the survey, larger plans and especially DB plans stand out positively on all measures of good governance. These plans are more likely to provide training support and to be aware of the guidance issued by the regulator.

Among DB plans there has been a significant increase in the proportion of plans with a subcommittee responsible for reviewing the sponsoring employer’s business plans. However, among medium and smaller DC plans, there has been a drop in those saying that the board regularly reviews investment strategy, which the regulator says may be as a result of day-to-day pressure on these businesses and the uncertainty within the investment markets.

There has been a significant increase (from 45% to 60%) in the proportion of plans agreeing that they believe their board has appropriate processes in place to manage conflicts of interest. The report pointed out though, that only half (52%) of all plans maintain a register of trustee interests.

Overall awareness of the Trustee toolkit is 89%, and the survey shows that the proportion of plans (and more importantly the number of trustees within each plan) using the toolkit is continuing to grow. However, one third of DC plans have not made use of the toolkit.

Despite nearly three quarters of plans reporting that they have a documented risk register in place, only two thirds of plans are very confident that they have appropriate internal controls in place to monitor and mitigate specific risks. The propensity to have a risk register varies significantly between large plans (91%) and smaller plans (59%). Confidence in internal controls varies from two thirds (66%) being very confident of internal controls relating to fraud, while just two fifths of plans (43%) have confidence in the controls relating to data transfer.

At the time of the survey only one in five plans had made use of the regulator’s communications guidance, according to the report, but the regulator noted that the guidance had only been issued in the six months  prior to the survey and usage is likely to grow. Two thirds of large plans have used or considered the guidance issued by the regulator compared to two fifths (42%) of small plans. Key reasons for not using the guidance cited were a lack of awareness or insufficient time.

Though usage of the regulator’s guidance is low, most plans reported they regularly communicate with their members, but few plans  assess the effectiveness of their communications, and only one in five plans would go so far as to say their board communicates very effectively.