The research, by the leading pensions and financial services consultancy, found that seven out of the nine professional trustee firms surveyed said the General Code has “to some extent” helped raise the bar on governance for sole trustee schemes. With governance being one of the key drivers of demand for sole trustees, employers and members expect sole trustees to maintain a high bar when it comes to adhering to the General Code, so reviewing governance approaches is vital.
The professional trustee firms who have adjusted to the General Code have done so through a variety of approaches including, the introduction of centralised governance policies, leveraging technology to facilitate process, and gathering MI. The survey found that centralisation and technology has helped individual trustees to establish effective governance for their schemes, assisted with compliance, and created efficiencies when updating governance frameworks for new regulations.
The research also shows that sole trustees are developing innovative and pragmatic solutions to the implementation of the risk management function (RMF). The degree of separation that they are able to create, in terms of day-to-day risk management from oversight of risks, will depend on the scheme size and complexity. Generally, the approach to risk management was not prescribed at firm level, giving sole trustees flexibility to exercise their discretion.
Commenting on how sole trustees can best respond to the new requirements in the General Code and the need for pragmatism, Shani McKenzie, Head of Sole Trustee Services, Hymans Robertson says: “We’re regularly engaging with professional trustees to understand how they’re operating and what is impacting them. Following the recent announcement from TPR we’ve seen professional trustee firms acknowledge that achieving the outcomes members deserve demands high standards of governance and risk management. There is an expectation that professional trustees will be spearheading this. Further, in a landscape where decisions are becoming increasingly complex, professional trustees can play a vital role in ensuring pension schemes have good governance.
“We’ve seen from our research that many sole trustees have welcomed the General Code as an opportunity to enhance their in-house governance approaches and are taking diverse approaches to meeting their regulatory requirements. For the majority, this has been about leveraging technology and having standardised frameworks to ease the implementation and maintenance of an effective system of governance. Importantly, this is being balanced with freedom at scheme level to exercise discretionary departures from the centralised approach. This flexibility at scheme level is a critical step to achieving an effective system of governance and supporting the achievement of pension scheme goals and objectives. The terminology around the risk-management function (RMF) requirements are new, as is the desire for there to be a degree of separation between the trustee board and daily management of the framework. There is room for interpretation here and firms are taking innovative and pragmatic approaches to achieving this.”
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