Occupational pension scheme governance

Key findings of the survey, bringing together themes evident in the results, are as follows:

1.
The overall picture from the survey is similar to that from the 2009 survey
Results for the headline indicators across the 11 areas of governance (where trends are available) have remained stable year-on-year. The only notable movement is a slight fall in the proportion of schemes who say they ‘regularly review its investment strategy’. Many other key measures in the survey have also remained relatively unchanged, including the areas of risk management/internal controls and learning/training for trustees.

2.
Schemes believe that their trustee boards are governing effectively overall
Nearly all schemes (96%) think that the trustee board governs their scheme either very or fairly effectively overall. A very small proportion (3%) think their governance is not effective. The equivalent results, seen in the previous 2009 report, were almost identical, 95% and 3% respectively; although the proportion of very effective responses was lower in 2009.

3.
Small and defined contribution (DC) schemes are somewhat less confident about their governance Half of small schemes (49%) regard their overall governance as very effective, compared to 61% among medium and 74% for large schemes. Approximately two-thirds (65%) of defined benefit (DB) schemes think their overall governance is very effective, compared to 40% among DC schemes (and 35% for small DC schemes).

4.
Small, and particularly small DC schemes, demonstrate weaker governance behaviours
In areas of both trustee knowledge and training, and governance behaviours, medium-sized and particularly large schemes generally perform better than small schemes. An important example that illustrates this is that 84% of large schemes say the trustees had documented or formally assessed the learning needs of some/all trustees over the previous 12 months. This compares to 65% among medium-sized schemes, and 34% for small schemes. Indeed, this figure of 34% of small schemes having undertaken this in the past 12 months remains very similar to the 30% level observed in 2008.

5.
The pattern of weaker performance among small schemes is a general longer term trend seen over several years of this survey
Over the course of the 5 successive scheme governance surveys, small schemes and, in particular, small DC schemes have continued to stand out less positively on all measures of good governance. A greater proportion of these schemes are less likely to engage in training activities and be aware of the guidance issued by the regulator, which highlight the difficulties that the regulator faces in raising standards of governance across the board.

6.
The Trustee toolkit is an important learning tool for trustees
Usage of the Trustee toolkit gradually continues to grow. The vast majority of schemes (91%) are now aware of it, with 74% having made use of it in some form. However, usage is lower among DC schemes (54%) and, in particular, small DC schemes (45%). The value of the toolkit is clearly illustrated by the fact that 9 in 10 users (92%) said they had indeed found it useful.

7.
Awareness of the regulator’s record-keeping guidance has risen
Promoting quality record-keeping has been an important area of recent focus for the regulator. Accordingly, it would seem encouraging that approximately three-quarters (74%) of schemes, including 6 in 10 (59%) small DC schemes, say they are aware of the guidance ‘recently-released on the regulator’s website’ (namely the June 2010 guidance). This compares favourably with a figure of 48% seen in the 2009 survey report (when schemes were asked whether they had seen the guidance at that time).

8.
There is a degree of confusion regarding knowledge about, and perceived value for money of, DC scheme charges
Among schemes with a DC element, under half (46%) rate their trustee board’s collective understanding of annual management charges as at least very good. Understanding of other types of DC charging is actually lower than this. A significant proportion, 1 in 5 (19%) for DC schemes, is unable to judge whether the charges incurred by members will represent value for money. A further 1 in 10 (12%) is not confident about these charges providing value for money to members.

9.
Communications to members remains a key area for potential improvement
‘Ensuring a high standard of member communications’ remains, as identified in previous surveys, an area of relative weakness compared to other indicators, with 28% strongly agreeing that the trustee board ensures this, whilst 14% expressed disagreement. This continues to represent a particular area where the regulator would like to focus improvement. The proportion thinking that the board should do more in terms of ensuring a high standard of member communications is relatively even across small, medium and large schemes.