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Employer  >  Trustee Zone  >  OPS Matters  >  How TPR will govern work based-pension schemes

How TPR will govern work based-pension schemes

In April this year, The Pensions Regulator (TPR) issued a consultation document on how they intend to promote the governance of work-based pension schemes. This document, unusually, covered all aspects of pension provision from defined benefit schemes right down to group personal pensions.

TPR have now issued their response to that consultation which lays out their plans on how they intend to govern work-based pension schemes going forward.

What's it all about?

First off, TPR are keen to stress two things:

• They do not want to increase the (ever increasing) legislative and regulatory burden on employers or trustees but instead encourage good governance by providing education, guidance and support to those involved in the running of pension schemes.
  
• The original consultation mentioned that, instead of trustee boards, Group Personal Pension schemes could have management committees set up by the employer to oversee the scheme. The committee would perhaps consist of representatives from the employer and employees. Whilst TPR continue to support such committees, they can't actually make employers set up such committees but will support those who wish to go this extra mile.
  
  

What does TPR intend to do?

Education is very much the keystone of the TPR’s paper. There are particular areas in which they will concentrate their efforts.

Trustee knowledge and understanding

TPR will:

• meet with key organisations (e.g. the NAPF) and service providers to encourage the promotion of targeted trustee education
  
• review the online trustee toolkit to ensure it remains up to date and fit for purpose
  
• use data from small schemes to market the toolkit
  
• revise the existing trustee guidance.
  
  

Conflicts of interest

TPR plan to issue detailed guidance on conflicts of interest including case examples and templates of things like risk registers and declarations of interest.

Monitoring the employer covenant

Revised guidance on clearance will be published, incorporating methods of monitoring and assessing the employer covenant.

Relations with advisers

A checklist of questions for trustees to ask advisers will be made available with a view to increasing trustees’ confidence in dealing with professional advisers.

Administration

TPR want to develop, promote and share good practice in administration, give examples of good practice for service level agreements, internal controls, data transfer, and member understanding whilst developing closer relationships with administrators.

Processes for investment choice

TPR will publish examples of:

• different approaches to the design of default funds with a list of issues that need to be taken into account and clear and simple information for members such as investment options and performance
• effective processes in selecting fund managers and performance reviews
• investment options and diversification
• good practice in the processes involved in investment choice.
  
  

Governance during wind-up

There will be a new module introduced into the trustee toolkit which will cover this area and guidance issued on how TPR will regulate schemes during wind-up.

Contract-based schemes

Although such schemes (e.g. group personal pensions) are outwith the remit of TPR (except in connection with collection of member contributions), they will:

• provide examples of employer committees
• provide a checklist for employers to ask advisers about conflicts of interest
• provide examples of service level agreements between, for example, providers and employers
• promote the value of good member communication
• promote good practice in the governance of investment processes, regular reviews and fund choices

It's not the case that any of this will be compulsory for contract based schemes - employers will be free to choose whether to take on board the TPR's recommendations or not.