There has never been a greater need for advisers to ensure any company workplace pension schemes they work with are managed correctly, writes Steve Butler.
Increased regulation and ever-changing legislation mean pensions have become ever more complex and good governance has thus become crucial. Having regular governance meetings to ensure a company pension scheme is well-run is something all businesses should be doing.
Governance meetings not only help prevent costly mistakes that could leave a business exposed to fines from The Pensions Regulator, they provide another opportunity to monitor the pension and make sure it is delivering the best value and is on track to meet employees' expectations.
So how can advisers help companies get the most out of their governance meetings? One of the first steps is to make sure the appropriate people attend. As well as HR, it is important to have a good mixture of staff representatives and senior management. This helps ensure the meetings and action points are taken seriously - and that there is a high level of ideas.
Having the right mix of staff in the meeting also helps improve employee engagement with workplace pensions throughout the business. Employees who attend these meetings feel empowered because they are part of the decision-making process.
As a result, they are more likely to ‘cascade' information throughout the company and, when staff can see that the business cares about their pension scheme and manages it carefully, then they tend to care more too.
During the meeting it is good to work from a checklist, to ensure all the salient points are well covered. Here are some of the key things this should include, which every governance meeting needs to run through:
* Performance: How is the pension scheme doing? Don't just look at the bottom-line figures - consider whether the company is achieving value for money and benchmark against other retirement plan providers. Most importantly, think about whether the members of the pension scheme will have the savings they need to enjoy the lifestyle they want when they retire.
* Quality: How much are the employer contributions? How is the scheme structured? Again, benchmark the quality of what the company does against the rest of the sector, as well as against government recommendations. If a company wants its scheme to attract and retain staff, it cannot fall behind with employer contributions or let the structure of the pension plan become outdated.
* Market trends: What are the changes to workplace pensions the company need to be aware of? And which new regulations are going to affect it? The company must stay up to date to avoid getting caught out by the regulator and falling behind its competitors.
* Demographics: How well are employees engaging with their pension scheme? How many people are opting in, and how many are opting out? By understanding this data, a company will be able to see how valuable employees perceive the workplace plan to be, and whether they are getting the maximum benefit from their investment.
* Communications: Do employee communications provide relevant and valuable information about the pension scheme? And how successful are those efforts? Often companies go to great lengths to produce information but fail to tell employees where it is - for example, having content on an intranet that no one uses.
* Action plan: This is something all good governance meetings should end with - concrete next steps so that all areas of concern are dealt with. The next meeting should also go through this at the start to ensure everything has been done and prioritise anything that has been missed.
While pension governance meetings will not guarantee mistakes are never made, they will ensure they are more likely to be caught early. Given the risks involved - including fines and potential reputational damage, as well as to employees' futures - it is well worth getting any company workplace pension schemes you work with into the habit of regular meetings.
Steve Butler is CEO of Punter Southall Aspire
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