The Pensions and Lifetime Savings Association has published a response to The Pension Regulator’s consultation on 21st Century Trusteeship and Governance.

The PLSA response is largely supportive of the changes discussed by TPR and encourages the regulator to pursue higher standards for professional trustees and scheme Chairs. In particular, we are heartened to see the issue of scheme consolidation given serious consideration.

In other countries with highly regarded pension systems such as Australia and the Netherlands, smaller schemes have been consolidated into fewer, larger entities in order to achieve economies of scale and reduce the risk of the dilution of scheme quality. The PLSA believes the time has now come to take similar steps in the UK.

The consultation response also argues that though the measures proposed are largely sensible, it would be a mistake to think that these relatively subtle changes alone are sufficient to achieve a governance structure that can achieve the best possible value for scheme members over the long-term.

Governance is the foundation on which the success of a pension fund is built – having the right people in the right environment with the right resources and incentives gives schemes the best possible chance of achieving great results, while poor quality governance drastically increases the prospect of failure.

As such, this is a critical topic.  For regulators who cannot control external factors such as demographic change or the wider economic context, governance should be the number one priority. Against a backdrop of significant challenges for pension schemes – for example, the significant increase in the number of stakeholders brought into pensions saving through auto-enrolment in the DC space; funding challenges in the case of DB – there is a need for radical measures in terms of the scale, standards and accountability of governance structures.

The PLSA will be publishing our own discussion paper highlighting ideas for bolder governance reforms later this Autumn.