Less than a quarter of UK pension schemes believe that the Pensions Regulator's (TPR) new code of practice will add value to their governance processes, a survey has uncovered.
TPR’s single code of practice is due to come into force later this year, and will require all schemes with 100 or more members to adhere to new risk, governance, and effectiveness practices.
However, after surveying nearly 200 trustees and pension managers of defined benefit (DB) pension schemes in the first quarter of this year, Willis Towers Watson (WTW) found that just 22% believe the new requirements will add value to their scheme’s governance.
A substantial 61% think it will take significant time and resource to become compliant with the new code, yet 25% have not undertaken training on the new requirements, and 13% have not carried out a gap analysis to discover where their scheme governance is lacking.
Jenny Gibbons, pensions governance lead at WTW, said that many schemes that have undertaken a gap analysis have realised that their current governance framework is closer to the level required by the code than they first thought.
She continued: “There is more flexibility in the new code’s requirements than many think, but at the moment it’s a fear of the unknown that seems to be driving anxiety around it.
“That’s why we would urge all schemes to identify their governance strengths and weaknesses sooner rather than later, so they know the length of their ‘to-do’ list and can plan in good time before the new code comes into effect.”
WTW’s survey also found that trustee board chairs spend an average of 53 hours per year on governance-related activity, while chairs of sub-committees spend an average of 47 hours, and regular trustees spend 37 hours.
However, 62% of those surveyed said that it is becoming harder to find members to act as trustees. To address this, 42% of schemes have taken at least one action in the last year to encourage diversity on their board.
The findings also show that 26% have actively promoted the role of trustee as a career development opportunity in order to encourage applicants from a broader range of backgrounds, an increase from the 14% who had done so last year.
One-in-five schemes have encouraged member-nominated trustee applications from under-represented groups, and the same proportion have undertaken training on diversity and subconscious bias, an increase from 14% and 13%, respectively, in 2021.
Over half of the respondents thought that member, or lay, trustees should be paid in order to compensate for the increasing time commitment required.
It is less frequent for anyone other than independent professional trustees (IPTs) to be remunerated for their time. Currently 65% of trustee boards include at least one IPT, and this is expected to rise to 73% in the next two years.
Gibbons commented: “Remunerating more trustees for the time they spend on their duties could be one of the most effective ways to open up opportunities to a broader, and larger, base of applicants who would not otherwise be able to make the commitment.
“The increasing professionalisation of trustees’ roles is evident as more schemes appoint IPTs, so extending some payment to all trustees could benefit scheme governance in the long term.”
Image credit: iStock
Author: Chris Seekings