| UK pension scheme governance: "Significant minority" reveals shortcomings |
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| 17/09/2006 | |
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The UK's Pensions Regulator says that although most schemes are well-governed, a "significant minority" still show room for improvement in the area of good practice. This statement follows a survey of the governance practice in over 1200 pension schemes throughout the UK. The Pensions Regulator found that in spite of its recent governance work, among which the recently published code of practice of trustee knowledge and understanding, small schemes are more likely to reveal governance shortcomings. "This was particularly so for defined benefit schemes with more than 5,000 members. The survey did not, however, suggest that only big schemes are well governed or that they are well governed in every respect," specified the watchdog. Among other revelations, it found that 70% of defined benefit schemes have no specific policy to manage conflicts of interest and 37% do not review the sponsoring employers' credit rating. Also, 20% of all schemes with a main provider of administrative services have no service level agreement with their administrator. The Pensions Regulator explained the usually better governance at larger schemes in part by the focus on training and risk management processes at those schemes. "Good practice in governance is clearly associated with the extent of training and having risk management processes," reported the pension watchdog. "This was demonstrated on training by a 43 percentage point difference between schemes whose trustees had had advanced training in the last 12 months, compared with those who had not had any formal training, who strongly agreed that the trustee board regularly reviewed its investment strategy." The watchdog continued: "There were also large differences in reviewing and updating scheme rules, taking steps to follow good practice in governance and ensuring a high standard of member communications between schemes whose trustees had had advanced training and those who had not. A similar association was found on issues particularly relevant to defined contribution schemes: reviewing the appropriateness of investment choices, investment fund performance, fund charges and administrative services for individual members." J.L. |
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