Key points
- Make sure you have people, structures and processes in place that work well for your particular scheme. These will help you to make decisions effectively, manage risks to the scheme and members, seize opportunities and set appropriate long-term objectives.
- Get the basics right first. This includes making sure we have up-to-date information about your scheme, completing your scheme return on time and getting annual benefit statements to members on time.
- We already take action against breaches of the basics and we will increasingly focus on schemes with wider governance issues.
Good governance
Good governance is the bedrock of a well-run pension scheme. There is a clear link between good governance and good fund performance so it is an essential part of effective scheme management. Without good governance, you are unlikely to achieve good outcomes for members.
Good governance is about having motivated, knowledgeable and skilled people involved with running the scheme. It’s also about having the right structures and processes to enable effective, timely decisions and risk management, and to provide clear scheme objectives. It helps you to effectively oversee:
- administration and record-keeping
- investment and funding (in local government schemes)
- communications with members
You should spend time and resources getting your scheme governance right. This will help you to minimise risk and maximise opportunities for your scheme and your members. Investing in good governance is likely to save you in the long run, delivering good value for members and employers, and improving member outcomes.
Check your governance: the basics
Consider the questions below to check your scheme’s governance of the basics. These are all things that we expect you to be doing. Make sure someone is responsible for each task.
- Do you regularly discuss and review the governance of your scheme?
- Do you complete your scheme return on time and accurately?
- Do you update scheme information on Exchange as soon as possible when things change?
- Do you respond to our requests for information about your scheme and tell us about problems and issues, including late payment of contributions and breaches of the law?
If you fail to do the basics we will take action.
Failing to get the basic legal duties right is likely to be a sign of wider failings. We pay closer attention to schemes that we believe pose a greater risk.
Read about enforcement action we have taken:
Use your business plan
Setting a clear purpose and strategy is essential to managing your scheme effectively and getting good outcomes for members.
Having a business plan will enable you to plan ahead and improve your ability to comply with legal requirements at all times. Use your business plan to help you to:
- set out strategic goals for your scheme
- check your progress using short-term and medium-term objectives
- take action effectively if objectives are not being met
- prioritise scheme business and board agenda items
- plan training and other activities to develop the skills of the board
- co-ordinate activities of advisers and those providing services to your scheme
- engage with employers
- manage risks effectively
Your scheme’s business plan needs to cover:
- clear, long-term goals for your scheme and interim objectives around key areas of focus including governance, investments (for local government schemes), administration and communications
- how you propose to meet these objectives and goals
- how you will measure and monitor progress towards them
You should review your scheme’s business plan and goals regularly.
We've produced a sample business plan and annual planner for trustees that you may find useful:
Meetings and decision making
Running effective board meetings is the foundation of good scheme governance. It will help to ensure that timely decision-making takes place, improve scheme efficiency, and help lead to good member outcomes.
A meeting agenda should be compiled and circulated to the board at least two weeks before the meeting. You can use your scheme’s administration strategy to help focus the agenda points on strategic issues and risk identification.
Potential agenda items could include the following:
- conflicts of interest
- minutes/actions from previous meeting
- management information
- risks to the scheme (emerging, new and existing)
- administration matters
- member and employer engagement, including communications
- investment performance and strategy (where relevant)
- sub-committee decisions
- any other business
You must keep records of pension board meetings, including any decisions made. Schemes should also keep records of key discussions, which may include topics such as compliance with policies relating to the governance and administration of the scheme.
Case study on the value of good governance
Costs of poor record-keeping
We reviewed scheme record-keeping in 2013/14. In two cases relating to schemes linked to the same employer, the trustees didn’t have sufficient oversight of the quality of their scheme data, which in turn meant that sufficient processes were not in place. The trustees carried out a full data cleanse to address our specific concerns. These included missing addresses and postcodes for deferred members.
As part of the data cleansing process the trustees also identified that a number of deferred members had died and arranged for their benefits to be settled. These schemes had been funding liabilities for deceased members, leading to extra costs for the schemes and sponsoring employer.
We were able to close our cases after the trustees showed their processes now trace members on an ongoing basis rather than waiting until shortly before they reach their normal retirement date, and the governance and oversight of the scheme’s administration processes had improved. By keeping records up to date, the schemes improved their efficiency and could accurately establish their liabilities.
Learning
You should consider similar issues to the trustees in this example. Poor data quality can lead to extra costs and can negatively affect members. Invest in good record-keeping and make sure oversight processes are robust to avoid extra costs in the future.
Further guidance
- Administration (this guide has been drafted for schemes providing money purchase benefits, but others may find it useful)
- Record-keeping guidance for all pension schemes