Taking the pulse of pension scheme governance
When we’re talking pensions governance, 2024 is the year of the Code. After an almost five-year gestation period, the General Code came into effect on 28 March 2024. The final form of the Code contained few surprises, but for many schemes, there remains a journey ahead to fulfil its requirements.
Alongside Regulator-driven changes to scheme governance, we are also seeing other external factors change the focus on governance: with the improvement in funding seen in the past two years, many more schemes are at the point of targeting buyout, which will have clear implications for their governance strategy.
To better understand these changes, we surveyed 132 trustees, pension managers and other stakeholders in March and April 2024, in the fourth edition of our WTW Trustee Governance survey. This examines how pension scheme governance is evolving in the current environment, how schemes view the opportunities and challenges posed by the General Code, and how schemes are altering their governance strategy on their path to settlement.
41% of participants identified compliance with the General Code as their top priority for their scheme's governance over the next two years.
The General Code has brought governance to the front of mind for many schemes, but it’s more likely to require fine-tuning of existing processes rather than wholesale changes.
Schemes have made good progress towards Code compliance, but are still grappling with some of the new expectations – in particular, appointing a risk management function and assigning responsibility for managing their internal audit frameworks. It’s also clear that there is room for improvement when it comes to risk management – one of the key areas of focus within the Code.
It is also important that schemes approaching buyout seek to reprioritise their risk management processes to focus on those risks that are most prevalent in the run-up to buyout.
As ever, new expectations placed upon pension scheme trustees, including those from the General Code, continue to challenge bandwidth. In responding, it’s important that decision makers retain clarity on their scheme’s underlying objectives and understand the governance enablers and the potential obstacles that could frustrate them – because good governance leads to good outcomes.
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