Chair’s statement ‘does not work’ as single instrument for multiple policy goals

Chair’s statements do not work as intended in achieving multiple policy goals as a single instrument, the Department for Work and Pensions (DWP) has said.

In a review of The Occupational Pension Schemes (Scheme Administration) Regulations 1996, the government noted that policy objectives were being achieved in relation to “the vast majority of provisions”.

However, policy objectives in relation to the chair’s statement were not being achieved within the current approach, particularly as a single instrument trying to achieve multiple policy goals around governance and engagement.

It also noted that the statement was not working as a document intended for multiple audiences.

The review called for the statements to be re-focused to deliver their intended goals, suggesting that the government and The Pensions Regulator (TPR) consider the intended audience and provide clarity to the pensions industry “to remove collective confusion and ambiguity”.

Once the intended audience has been clarified, the report stated that further work was required between the DWP, TPR and the industry to ensure that common content is agreed upon to address the statement’s issue of being too long, complex and costly.

“This would enable the chair’s statement to be shorter and more focused than the way it is implemented under current requirements,” the government said.

“An area to explore is the balance between whether this should be in a single document which members have sight of or whether there is a need to divide the requirements into different documents.

“We will consider whether the chair’s statement should be used by trustees to disclose whether they have requested costs and charges information using the CTI templates, as part of our commitment from the review of the default fund charge cap and standardised costs disclosure, to drive up their use.”

The report also noted that some contributors felt that completing chair’s statements was a tick-box exercise, which it said could be an unintended consequence of legislation leading to a rigid interpretation or TPR’s focus on compliance due to the mandatory nature of the penalty.

Although it was not within the scope of the review, the report suggested that consideration should be given to the legislative requirement for TPR to issue mandatory fines in relation to chair’s statements.

It asked whether an amendment should be introduced to allow TPR to use discretion in its issuing of fines for chair’s statements.

“Working proactively with scheme providers on shortfalls in the content of the chair’s statement once received would align with how TPR works more generally with the pensions industry, for example on authorisation and supervision of master trusts,” the report concluded.

Commenting on the review, Aegon head of pensions, Kate Smith, said: “The DWP’s review has clearly demonstrated that there has been an overwhelming consensus that the chair’s annual statement in its current format is simply not working.

“The multi-purpose nature of the chair’s statement has bought many challenges for trustees. It’s become too long and costly to produce and is more a regulatory document than a member-facing communication. To top it off, it’s rarely read by its original intended audience, the members. The chair’s statement clearly doesn’t work for multiple audiences.
 
“We’re pleased that the DWP has listened to the pension industry’s concerns and will be considering who the intended target audience should be and revisiting the content of the chair’s statement. Having two separate documents, a regulatory and member-facing document would be a significant improvement.”

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