The National Association of Pension Funds (NAPF) says millions of working Brits could be exposed to poorly-governed pension schemes, creating a ‘governance vacuum'.
A discussion paper entitled: Pension Scheme Governance – fit for the 21st century? argues the suitability of current pension governance arrangements for future retirees, as a result of a recent shift from trust-based defined benefit pension provisions to contract-based defined contribution schemes.
The pensions body also proposes a new voluntary ‘Code of Pensions Scheme Governance,’ scheme to ease the regulatory burden faced by pension trustees.
Joanne Segars, director of policy at the NAPF, says assets exceeding £700m, affecting as many as 20 million Britons, means good governance among all the UK’s pension schemes is vitally important.
Segars says while the traditional trust-based model of scheme governance has been successful; a changing pension environment requires new ideas.
Moreover, she argues if Government intends to include workplace pension provision as a major player within its pension reform, a policy framework is needed to ensure such schemes are effectively governed.
Segars concludes: “Ensuring that all schemes are well governed and effectively protect the interests of working people will be an important step forward in helping restore workers’ confidence in saving for retirement."
The discussion paper points out while contract-based, defined contribution workplace schemes have increased in the past five years, no effective mechanism has been put in place to promote or represent the collective interests of scheme members.
It also points out the vast numbers of small occupational pension schemes (80% have fewer than 12 members) struggle to manage the requirements of effective trusteeship and to apply reasonable standards of scheme governance.
The paper seeks government and pensions industry views and sets out various options for reforming and extending good pensions governance, including the voluntary Code of Pension Scheme Governance for trust boards and management committees.
A closing date for responses has been set for 3 October.
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