The Pensions Regulator (TPR) has launched a consultation outlining proposals to reduce the number of poorly governed pension plans in the UK. The regulator of work-based pensions warned that if trustees cannot meet its standards, they should consolidate their plan into one that’s managed better.
“The trustee model isn’t broken, but it does need to be greatly improved,” David Fairs, TPR’s executive director of regulatory policy, analysis, and advice, said in a release. “There is stark evidence that the current system doesn’t work for all and there is a clear disparity between the experience of savers in well-run and badly-run schemes. If trustees cannot meet the standards we expect, we believe they should wind up and consolidate savers into a better run scheme.”
In the consultation, TPR says it will seek to facilitate and encourage pension plan consolidation as a way of supporting efficiency and closing the quality gap to which Fairs referred.
The consultation will be open for 12 weeks and will close on Sept. 24. Responses can be submitted through the TPR website.
TPR said trustees of underperforming plans will need to consider whether they are able to offer value for members or whether savers are better provided for in larger plans, which typically benefit from economies of scale. The regulator said that authorized master trusts offer a route for consolidating defined contribution plans, with group personal pensions (GPPs) providing an alternative for securing savers’ benefits.
“We are working with the Department for Work and Pensions to find a solution to support defined benefit (DB) consolidation, with discussions currently considering the shape of an authorization and supervision regime for DB superfunds,” said TPR in the consultation.
The consultation also said TPR is considering how to promote more diversity on boards, including encouraging the make-up of the board to reflect the savers it represents. It also said it is considering whether an accredited professional trustee should sit on every board. TPR said that having a professional trustee on every board may help to improve standards of governance and administration.
In addition to offering proposals to reduce the number of poorly governed pension plans, the consultation poses questions to the industry about how to improve and evidence trustee knowledge and understanding, how to encourage diversity on boards, the role of accreditation, and whether sole trustees are able to govern effectively.
“We believe all savers should be in well-run schemes that deliver good value,” said Fairs. “There is still a subset of disengaged trustees who either refuse or are unable to improve standards in their schemes.”
Questions posed to the pensions industry in the consultation include:
- Should there be an accredited professional trustee on every board?
- Are sole trustees on a pensions board able to run pension schemes appropriately?
- How can barriers to consolidation be removed?
- Should a legal requirement be brought in for trustees to meet minimum standards of knowledge and understanding, and ongoing learning?
- How can diversity on pension scheme boards be improved?