Occupational pension scheme governance

1.
Larger schemes tend to be associated with higher levels of governance activity
Throughout the survey, large schemes and especially large defined benefit schemes stand out positively on all measures of good governance. These schemes are more likely to meet regularly, provide training support and to be aware of the guidance issued by the regulator. The results also identify – as in previous reports - the difficulties the regulator faces in raising standards where the resources available for administering the scheme are more limited, in particular with small DC schemes.

2.
Previous waves of the Scheme Governance Survey have identified that the frequency with which the trustee board meets is a strong indicator of good scheme governance and administration
Three-quarters of schemes (72%) full trustee board meets at least every six months. However, the frequency of board meetings remains less regular among small DC schemes with one-in-five (22%) meeting less often than annually or not at all.

3.
The Trustee Toolkit is established as a key source of knowledge for both existing and new trustees
Overall awareness (92%) and usage (76%) of the Trustee Toolkit remains high, reflecting the regulator’s success in maintaining its profile. Awareness levels (77%) and actual usage (62%) are lowest amongst small DC schemes.Amongst those schemes that have used the Toolkit, the majority (91%) assess it positively.

4.
The proportion of schemes that provide trustees with an induction programme of learning activities on appointment has declined
The proportion of schemes that provide trustees with an induction programme of learning activities on appointment has declined from 61% to 54% in the period from 2008 to 2012.

5.
The number of trustees undertaking formal structured training remains low
Across all schemes almost half of trustees (44%) are unlikely to have undertaken any formal structured training in the last twelve months. Whilst only 7% of large DB schemes report such lack of engagement with formal training, a much higher proportion (74%) of small DC schemes have not undertaken such training.

6.
Trustees are both aware of and engaged with the regulator’s record keeping guidance
There has been an increase (from 74% to 88%) in the proportion of schemes reporting awareness of the record keeping guidance. This increase has been most notable amongst small DC schemes, where it has increased from 59% to 81%.
In addition, two-thirds (64%) of schemes undertake data accuracy reviews - in accordance with the regulator’s guidance - at least annually. Among those that do, three-fifths (58%) possess an action plan with regards to the accuracy of scheme data.

7.
Most schemes report that default funds have been established principally on the basis of risk profile and appetite of the scheme members
Consistent with the previous year’s findings, three-quarters of schemes (78%) offer a default fund to their members and a similar proportion (71%) have been established principally on the basis of the risk profile and appetite of its members.

8.
Member communication is identified by schemes as an area where trustee boards can make improvements
Schemes’ assessment of how the trustee boards communicated with members over the past twelve months was less positive than that recorded in 2011. Year-on-year trends by scheme type and size reveals that there has been a decrease in the proportion of schemes rating their board’s communications as either ‘extremely’ or ‘very effective’. This assessment of member communication is reflective of a significant proportion of trustee boards pointing to member communications as an area in which they can make improvements.

9.
Trustee boards’ knowledge of DC scheme charges remains low. Additionally, a significant proportion of schemes are not confident that the charges incurred by their members offer value for money
Across a series of specific charges measured, a significant proportion of schemes assessed the trustee board’s collective understanding as poor, this was particularly the case with regards to the portfolio turnover rate (14%) and the total expense ratio (10%). Approximately, one-in-six schemes (15%) are not confident that the charges incurred by their members offer value for money, whilst a further 16% could not provide an assessment. This lack of confidence or knowledge is evident among small and medium DC schemes only.