Atkin trustees, actuaries, consultants & administrators

Zen and the Art of Scheme Governance

The last few years have been astonishing for pensions.  What was just a quiet backwater just a few years ago has become today’s hot topic.  You just need to look at the number of pension publications that have grown from perhaps just a couple of monthly publications to the plethora of magazines and newssheets that now seem to pass our desks that now seem to pass our daily … and that’s without all the comment sheets from consultants.  It is difficult for professionals to keep pace, let alone humble trustees.  We certainly live in interesting times.

I thought that it would be worth finding out the origin of that saying – so a quick resort to wikipedia.  Apparently it was the first of three ancient Chinese sayings.  The second saying is somewhat pertinent – may you come to the attention of the authorities.  Because coincidental with, and contributing greatly to, this explosion has been the Pensions Regulator (and its kid sister, the PPF).  Previously, pensions came largely under the auspices of the Inland Revenue (now HMRC), ignoring the feeble and often ridiculously over-zealous OPRA.  The Inland Revenue maintained a relatively light touch, equivalent to a few bobbies on the beat.  The Pensions Regulator has been much more prominent, not zero tolerance but definitely high profile.

The Pensions Regulator aims to protect the interest of members (and, at the same time, the interests of the PPF).  It aims is to try to ensure that, as far as possible, members get the benefits they expect, to prevent abuses and to improve standards (particularly in relation to funding and security, standards of data and scheme governance).

There is a tendency to see the Pensions Regulator as the ‘enemy’; seeking to impose funding standards, reducing recovery periods and putting pressure on for employer covenant reviews.  We don’t hold with this view of the Regulator – he is really the trustees’ friend and supporter if used correctly.  The Regulator has been subtly steering trustees to adopt stronger funding bases (well perhaps not subtly), and to actually look at and monitor the strength of the employer, whom they rely on if things go wrong. 

Coming back to the Pensions Regulator as the friendly policeman, trustees have nothing to fear if they behave themselves and act as good citizens.

However, in order to behave you have to keep your house in order, which brings me on to governance.  The Regulator is encouraging, demanding improvements in governance.  I believe that this can go too far, for example in requiring lay trustees to read and understand their all trust documents (which suggests that sometimes the Regulator is in their ivory tower – have they ever tried to read a trust deed and all the amending documents!).

For good governance you need a record of what you have done, for audit and reference, and procedures in place for ensuring that things are done properly in the future (to meet legislation and good practice).

In our role as trustees we found that we needed to have good governance systems in place.  In our role as consultants we need to have similar systems to assist trustees and need to advise trustees themselves on what they should have in place.

We realised that one of the priorities was for trustees to be able to access all important documents, reports and minutes and papers of past trustee meetings.  Such information was often disorganised, spread out in different places, incomplete, badly referenced and inaccessible.  There was, therefore, a need to put in place a system that allowed any documents or reports to be pulled down instantly, referenced so that gaps could be spotted and filled and allowed electronic copies of documents to be provided to members where they hade the right to them.

A particular bugbear of mine is trustee meeting packs.  Often meaty piles of papers they more often than not get filed away in a drawer as a meeting pack.  As such they are not easily referenced and yet it is amazing how often you need to refer back to something that was said or reported on at a previous meeting.  Digging out old meeting packs is a nightmare!

In addition, trustees need a diary system to pick up actions (what now seems to be being called a business plan).  Tracking and ensuring that things are done are a headache for trustees (and indeed their advisers) so that a simple, effective and automated reminder system is a godsend.

SchemeHub stemmed from a realisation that trustees did not often have access to everything that they needed and certainly had difficulties tracking important jobs.

SchemeHub is a low cost / simple solution for the masses.  It is not intended as an all singing all dancing system that tries to incorporate too much.  The aim was something that does those jobs that the trustees really need doing.  Development concentrated on essentials in order to make it practical and affordable for all schemes.

Oh, earlier I mentioned that there were three Chinese saying.  You may be interested in the third – may you find what you are looking for. 

First published: 06.12.2010

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The service provided was at such high level that I have subsequently introduced Richard to other Final Salary Schemes and continue to be continually impressed with the level of service. Atkin are responsive and understanding and are quick to identify potential issues before they arise. Communications between the employer, adviser, Actuary, accountant etc. are excellent & I have no hesitation in recommending them.

Mike Emery, Ashley Law