A new year, a new decade with lots more change for trustees to stay on top of, as all the roundups show.
Here are five governance tips to help trustees navigate in 2020. The headings may be reassuringly familiar themes to some readers. These will help trustees manage governance issues in play this year, whilst a more focused TPR works with a single code of practice and we await a final Pension Schemes Bill.
1. Confirm where you are going and the likely route to get there
Whether DB or DC the trustees need a strategic plan with objectives for how required outcomes will be achieved, with as much clarity as possible on the sponsor’s position via-a-vis the scheme, and timescales.
Aspects for 2020 include:
- End game plans; the DB funding target; investment flight planning, roles; ESG and stewardship;
- Sustainability vs insurer, consolidator, sole trustee, master trust models; Brexit covenant impact;
- Governance, member journeys, member experience, member outcomes and value all need objectives in the plan.
2. Stay attuned to the major risks, changes and scenarios that could knock the Trustee’s plan off course
Paying effective board attention to risk is vital. Two aspects for 2020 are:
- An Own Risk Assessment and a strong risk and controls framework, with independent assurance, are 2020 highlights to meet IORP’s II requirements which will be brought into the new Code;
- Time spent on contingency planning (e.g. covenant, data loss, other operational scenarios) helps trustees consider how risks can escalate and combine, the board-level risk dashboard needed.
3. Engage, engage, engage
- The new Codes and legislation mean there will be ever more to engage on with the sponsoring employer, members, TPR
- And for many schemes a wider range of advisers and service providers, such as internal audit, covenant, derisking, member communications, DC, fiduciary management, fiduciary oversight…
4. Develop the plan for people, resources, skills and roles
- TPR is focusing on trustee effectiveness, fitness for role, skills and training, succession and appointments, board diversity and refreshment, professional roles and accreditation and sole trustee fitness. Have you got a plan, are you engaging on it; have you reviewed effectiveness…
- Linking to contingencies and delegations a key person plan is needed for those in the main supporting, advisory and service provider roles; current guidance anticipates this in the Code.
5. Spend more time on what’s most important, and vice versa – decide what else to delegate, where
- Linking to points above, trustee boards will again need to review their ways of working, how time is used in meetings, and if additional dates are needed e.g. strategy review, investment, training.
- More delegation (without abrogation), committees or working groups may be relevant e.g. fiduciary management; an audit and risk committee.
- Timed agendas to focus on ‘move the dial’ items; co-ordinated adviser papers; clear reports on delegated work; timely packs with detail housed separately; clear cover papers, timely minutes and follow up; these are all elements that make a difference. It’s worth the effort in 2020.