Only a quarter of pension trustee boards are using external to assess their governance, which could fall short of proposed requirements from The Pensions Regulator (TPR).
TPR is consulting on a new Combined Code, or code of practise for pension trustee boards, was initially introduced in January 2019 to ensure schemes have an “effective system of governance” using internal controls.
This is proposed to be amended to a requirement for them to establish and operate an “effective system of governance including internal controls” that is “proportionate to the size, nature, scale and complexity of the activities of” the scheme. Schemes with less than 100 members will need to meet the seven requirements relating to sound and prudent management, an adequate and transparent organisational structure, effective internal controls and communications, consideration of ESG factors, contingency and continuity planning and regular internal reviews.
However, research from Willis Towers Watson found only half of boards currently review their effectiveness from a governance perspective annually, and just over a quarter (29%) use some form of external validation.
Despite this, most trustees said their boards performed well against the governance and logistical challenges over the last year – with around 80% reporting good engagement in meetings and appropriate contingency plans.
Jenny Gibbons, pensions governance lead at Willis Towers Watson, said: “Reviewing the effectiveness of your trustee board and wider governance is a journey that’s well worth travelling. We know that better governance leads to better outcomes – for schemes, sponsors and members – and it is better to start this process now, rather than wait for the Combined Code to make it mandatory.”