Good governance is the cornerstone of any well-run pension scheme and is a key part of making sure a scheme is being run in the best interests of its members.
Our latest insight looks at what scheme governance workplace pension providers have in place and the key people involved in the process.
Pension governance is an essential part of ensuring a scheme is managed correctly, meets all legal requirements, and is run in the best interests of scheme members.
Ongoing pension governance was set out by The Pension Regulator as one of its six pillars for workplace pension schemes following the introduction of automatic enrolment in the Pensions Act 2008. Employers need to be able to demonstrate to the regulator that the scheme(s) they have in place for their employees have excellent ongoing pension governance and that internal control and monitoring are in place to meet its objectives with the best interests of the member prioritised.
With the regulator carrying out spot checks to ensure employers are complying with their pension duties, employers who cannot demonstrate their pension schemes have excellent governance find themselves potentially at risk of enforcement action.
With pension governance not being wise to ignore, our data shows that all workplace pension providers have established an administrative committee to oversee governance.
Most providers have between two and five independent representatives that form part of their governance committee. For Standard Life and True Potential there are between six and nine independent representatives.
The governance committee chairman is independent for all workplace pension providers.
One key element of pension scheme governance is a regular review of investments and ensuring they are suitable for the ongoing needs of scheme members. All workplace pension providers have a key person or team who oversee this process internally, with at least 15 years’ experience:
Aegon Master Trust – Master Trust Trustees with advice from Isio
Aegon Workplace ARC – Tom Orton (Managing Director Investment Solutions)
Aviva Designer/My Money – Jason Bullmore (Investment Proposition lead)
Aviva My Money Master Trust – Elizabeth Renshaw – Ames (Chair)
Cushon – Investment committee consists of Ben Pollard (CEO and founder) Julius Pursaill: Cushon Master Trust Scheme Strategist and Board Adviser – 4 independant trustees and investment advisers – ISIO.
Fidelity – This would fall under the remit of Workplace Investing Investment Oversight Group (WIIOG) which is comprised of key stakeholders from across the DC and investment teams.
Hargreaves Lansdown – Our CIO Lee Guardhouse is ultimately responsible for selection and reviews of the funds on our platform. All funds that are promoted to our Group SIPP clients are monitored on an ongoing basis. Members of the investment team meet with the managers at least once a year, and communicate the outcome of our research through our website. On a half- yearly basis our DC Investment Manager conducts a review of the suitability of our default options. This report includes an analysis of performance against other default funds and relevant benchmarks and sectors. This report is scrutinised by senior members of the Investment team including the CIO, and Workplace business managers. Any member of the investment research team can propose to remove a fund from the Wealth Shortlist at any time by issuing a note following a set template. If this is seconded by another team member, a meeting will take place following which every member of the team can vote for the fund’s removal or retention. When a fund is removed from the list, we communicate the reasons for this to all clients invested in the fund.
Legal & General – Investment Proposition Team (no specific individual)
Mercer Master Trust (Aviva) – MWS Investment Governance Committee
Mercer Master Trust (Scottish Widows) – MWS Investment Governance Committee
Royal London – Collaborative approach centred on our Investment Advisory Committee
Scottish Widows – Iain McGowan (Head of Funds and Investments)
Standard Life – Alastair Offor (Head of Investment Proposition Management)
True Potential – Chris Leyland (True Potential Investments)
Our data shows that all workplace pension providers monitor the performance of funds in line with their objectives. Most do this on a quarterly basis. Hargreaves Lansdown, Mercer Master Trust Aviva, Mercer Master Trust Scottish Widows, Scottish Widows, Scottish Widows GSIPP, Scottish Widows Master Trust and True Potential review the performance of funds in line with their objectives on a more regular monthly basis.
When it comes to what elements of fund performance are measured, the experience is fairly consistent across providers.
All workplace pension providers include performance, volatility, tracking errors against the agreed benchmark, fund liquidity and charges in their regular fund performance reviews. Other than Hargreaves Lansdown, all workplace pension providers also include external research.
Other than for Legal & General all providers monitor underlying assets in line with their investment objectives.
All providers regularly monitor changes (such as mergers and acquisitions) and analyse the affect they have on fund managers. They also all carry out qualitative research on their fund managers on a regular basis and communicate to members and advisers any changes that will impact an investment.
Our data shows that all providers also monitor regulatory/legislative changes and assess their impact on their auto-enrolment investment proposition, and provide regular reporting for advisers and scheme trustees as part of their review process.
Other than Aviva Designer, Aviva My Money and Hargreaves Lansdown, all workplace pension providers consider external advisers views when making investment fund decisions.
The approach to meeting notes and minutes is more guarded.
Only Aegon Workplace ARC, Cushon, Fidelity, Mercer Master Trust, Royal London, Standard Life and True Potential publish their meeting notes for external advisers.
Most providers publish meeting notes for internal advisers. Only Aviva Designer, Aviva My Money, Aviva My Money Master Trust do not.
However, only Aegon Workplace ARC, Fidelity and Royal London publish governance committee meeting minutes on their website.
When it comes to the easy access to governance information for interested parties, some providers are more open than others.
Aegon, Cushon, Fidelity, Mercer Master Trust, Royal London, Scottish Widows, Standard Life and True Potential offer a ‘Governance Zone’ with key measurement information for interested parties.
Other than the offerings by Aviva Designer, Aviva My Money and Aviva My Money Master Trust all workplace pension providers also generate governance reports for advisers.
Overall, our data shows that workplace pension providers offer very good levels of pension governance with a wide range of investment and administrative reviews in place. Most also include a good level of external advice to make sure that their schemes are being run in the best interests of their members.