Small DB schemes ‘lagging behind’ larger schemes

Small defined benefit schemes are “lagging behind” larger schemes when it comes to good governance, The Pensions Regulator has found.

New research from TPR found that trustees of smaller schemes place less emphasis on assessing the suitability of new trustee board members, and tend to perform worse when trying to meet the principles of the regulator’s funding code.

TPR said it has been stepping up its regulatory approach in key risk areas including governance, covenant, investment and funding. It will be providing “clear, directive feedback”, as a result.

Commenting on the research, TPR executive director of regulatory policy, David Fairs, said: “We are taking a far more directional approach to small schemes to drive up standards and ensure all members are in well-run schemes.

“It is challenging to be a scheme trustee and we continue to help trustees, of all size schemes, meet the standards we expect and make a positive difference for their members.”

The research, which surveyed 427 trustees and employers in March 2018, also found that 92 per cent of trustees and 87 per cent of employees had read the funding code.

Furthermore, 94 per cent of trustees have clarity on which employers are legally liable to support their scheme.

Despite this, the regulator said the research showed some areas of concern for DB schemes, such as failure to implement appropriate contingency planning, reluctance to assess employer business plans and a growing number not taking action to ensure the needs of their schemes are met among the competing demands of the employer.

TPR added that is currently working on a new funding code aiming “to introduce clearer funding standards to help trustees and employers”.

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