Governance in the Pensions Sector – Pensions Week 2023
September 2023

This week is Pension Awareness 2023 and to mark the occasion, we spoke with our pensions sector team to get the low down on governance in the sector.
Our expert team works with a number of pensions clients and is very well versed in providing support within this highly regulated sector.
In the wake of regulatory changes, economic uncertainties and a growing focus on retirement security, governance structures behind pensions schemes is an important topic.
The Pension Awareness campaign is run by Pension Geeks and aims to educate people on pensions, providing events, articles, and FAQs to help support pension knowledge.
1. Could you tell us a little about the support you provide within the pensions sector?
We provide support to the boards and committees of our pensions clients, ensuring a smooth interface between the parties such that all relevant regulatory/compliance matters are dealt with on a timely basis.
2. What aspects of governance do you deal with most within the pensions sector?
Principally, attending and minuting the meetings of client boards/committees and ensuring compliance with statute law and the company’s constitution, predominantly the articles of association.
3. What makes governance so important within this sector?
Following the global financial crisis of 2007-08, all financial services, including pensions companies, have seen increased regulatory focus, particularly on capital adequacy. The fallout from this crisis saw several high-profile businesses fail or suffer reputational damage. Financial services companies continue to be a focus of close attention, hence the need for robust governance throughout organisations, with the tone set from the top.
4. What advice would you give to cosecs who are looking to work within the pensions sector?
To take note of the challenges outlined above: attention to detail as well as having sight of the ‘bigger picture’ is essential to company secretaries regardless of the sector in which they work but especially so in sectors that are tightly regulated with high public profiles such as financial services, utilities and so on.
5. What role does the board of directors play in overseeing the governance of the company’s pension schemes?
This role of the board depends on the type of pension arrangements put in place by employers. With old-style defined benefit (DB) schemes, the employer/sponsor promises specified pension payments. The employer funds the difference between the scheme liabilities and assets. Accordingly, the board is responsible for ensuring that the scheme is adequately funded.
A separate Board of Trustees administers the scheme with input from professional advisors including actuaries.
DB schemes have been largely replaced with defined contribution (DC) schemes in which the employer and employee make contributions on a regular basis, with individual accounts being set up for individuals.
With DC schemes, employers are responsible for paying contributions on time, ensuring that there are systems that differentiate between the company and scheme assets and informing/consulting employees. The board would be responsible for ensuring that the company is compliant with these responsibilities.
6. What is the importance of risk management practices to safeguard pension assets?
Risk management is critical to safeguarding pension scheme assets. Trustees are legally required to have adequate internal controls in place for their schemes, including procedures for managing risk. Trustees must be able to evidence the internal controls to provide assurance that the scheme for which they are responsible is being well managed in accordance with the law and the scheme’s rules.
To access resources and find out more about the pensions awareness campaign, head to https://pensionawarenessday.com/

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