Trustee Governance Health Check Service
Pension schemes are increasingly required not only to have an effective system of governance in place, but also to be able to evidence this through documented policies and processes.
Some of this governance and associated documentation is required by law, whilst other documents reflect the emerging views of the Pensions Regulator (TPR) on what it now considers best practice.
In a world where there are many competing demands on trustees’ time, how can trustees be confident that they are meeting all these various governance requirements?
The Pegasus Governance Health Check Service provides a rigorous review of your governance policies and documentation, with tangible, tailored recommendations for improving your approach to governance as well as assisting you to shape the framework to keep your governance up-to-date and in line with developing requirements.
Why is there such a focus on governance now?
Pension scheme legislation continues to become more complex, placing additional governance burdens on trustees, for example through:
•Implementation Statements and TCFD requirements;
•expected changes to DB funding including the requirement to produce a new Statement of Strategy being introduced by the new Pension Schemes Bill; and
•the DC Chair’s Statement
TPR has put much greater emphasis on good governance through its 21st Century Trusteeship campaign and its more robust approach to fining trustees who fail to get the basics right: noting their consultation on the ‘Future of Trusteeship and Governance’.
We are seeing an increasing number of schemes being selected by TPR for relationship supervision, the first step of which involves the provision of a wide range of pension scheme documents to TPR to enable it to scrutinise the scheme’s governance approach
The UK has implemented the basic requirements of the IORP II directive, which requires all pension schemes to have an ‘effective system of governance’ but more is to come
TPR is expected to consult this year on its new single code of practice, which will implement the governance requirements of the IORP II directive fully, including:
•carrying out and documenting an own-risk assessment of the system of governance;
•having an internal function which evaluates the adequacy and effectiveness of the system of governance (effectively an internal audit function); and
•producing written policies on key functions, outsourcing and remuneration
We expect that this will involve additional reviewing of processes and associated documentation for even the best-governed pension schemes
How Pegasus assists our clients
Pegasus has a well-developed understanding of the key elements that make up a robust scheme governance framework, based on our experience working with many trustee boards and supporting them in developing, reviewing and monitoring their governance approach.
Our approach includes a comprehensive checklist of the key governance documentation, policies and processes that a well-governed pension scheme should have.
Our governance health check service comprises the following stages:
1. Meet with the Chair of Trustees or Pensions Manager to gain insights into the governance framework and, following the meeting, receive copies of the scheme’s governance documents
2. Review and assess these documents to ensure they are complete, up-to-date and consistent with the governance framework (we will not provide a full technical review. Our intention is to ensure that governance is robust but pragmatic, and we will never suggest additional governance policies unless we believe they are either required or would add value for your scheme’s individual circumstances).
3. Provide a report setting out areas of possible improvement to the governance framework, for example gaps in governance documentation, documents requiring review or update and new version protocols for keeping documents up to date.
4. Work with you or your advisers, as appropriate, to prepare or update individual documents.
5. We can in addition provide an ongoing governance monitoring service, where we will proactively request and review the key scheme documents annually to check that they meet any new legislative requirements and keep pace with emerging best practice.
For more information about this service please don't hesitate to contact Stephanie Howell or George Norval. They will be happy to answer any queries you may have.
Read more about Pegasus service offering here.