The OPA believes that the following issues are important for the provision of good sound scheme governance and constitute the principles of best practice:
Recognition of Pensioners' Associations
Some schemes formally "recognise" the existence of properly constituted associations of pensioners but unfortunately the majority still do not do so despite such recognition being featured in the 2004 Pensions Act as a result of lobbying by the OPA. We note that, unlike in the UK, the Dutch Pension Act of 2007 forces employers to pay attention to the views of the association of pensioners where these exist.
50% Member Nominated Trustees
Although an independent survey for the TUC has shown that 24% of schemes already have 50% MNTs the NAPF and others are fighting the government's intention to introduce this. The OPA maintains that a strong member voice is now more important than ever, given the current economic climate and uncertainty associated with pensions. The sponsor should not be in a position to possess overriding powers over the scheme assets, which belong to the members and not the company. There has to be a proper balance.
Independent Chairman
Following on from the above the OPA also believes that an Independent Chairman is the best way to maintain this proper balance in the governance of the scheme and to avoid conflicts of interest. See the FT article: Head on Collision of Interests
Independent Trustee
In the absence of an independent chairman (see above) the next best thing is the presence of an independent trustee on the board who can not only bring valuable outside experience to the board but also be in the best position to chair a sub-committee to resolve any issues on conflicts of interests.
Fair nomination and selection procedures for MNTs
The OPA believes that the principles laid out in the 2004 Pensions Act of proportionality, fairness and transparency in the nomination and selection processes for MNTs are being ignored by some schemes. For example in one of its member schemes less than 1000 members of the constituency for active members select 3 trustees and that for 10,000 pensioners select just one. The OPA maintains that such practices are unacceptable. The OPA also maintains that there is no good reason why the deferred members whose addresses are known should not be involved in the selection process.
Reporting
Standards of reports to members are very variable both in detail and timescale. Not only is the the annual Summary Funding Statement issued nearly 12 months after the annual valuation but also some administrators are delaying reporting the results of triennial actuarial valuations as long as possible. Legally the valuation has to be completed within 15 months of the valuation date and then the results have to be communicated to members within 2 months of the finalisation date. Thus the results can be 17 months old before members know about them. Some schemes are taking up to this full time limit whereas the best report within 9 months.
Open meetings to address members’ questions
Some schemes are known to hold occasional meetings similar to those for company shareholders in which ordinary members can pose questions directly to members of the trustee boards. The OPA believes that this should be encouraged.
Governance committee
Whilst the boards of many schemes have a sub-committee to consider governance issues many unfortunately do not appear to do so. Conflicts of interest issues, for example, need to be properly managed and preferably by a sub-committee chaired by an independent trustee. Adherence to The Pensions Regulator's Codes of Practice should be continuously monitored.
Sub-committees
There is a need for trustee bodies to involve MNTs fully and not sideline them by establishing committees on which MNTs do not serve.
Responsible Investment Policy
Trustee boards should adopt a responsible investment policy and have a "do no harm" clause in their statement of investment principles (SIP), requiring fund managers and other advisors to satisfy the trustees that their investment decisions are not causing systemic harm to the stability of the financial system and therefore to the long term interests of their beneficiaries. Environmental, social, and governance considerations should be taken into account in the selection, retention and realisation of investments and the responsible use of rights (such as voting rights) attached to investments. See FairPensions - the campaign for responsible investment and in particular the Trustee Best Practice Guide.
Finally see the Pensions Regulator's latest annual survey on scheme governance but bear in mind that that only the trustees are invited to score their adhernence to good practice and none of the members.
Back
|
