- \n
- Governance requirements;<\/li>\n
- Fit and proper requirements of pension scheme trustees;<\/li>\n
- Risk management requirements; and<\/li>\n
- The establishment of own risk solvency assessments.<\/li>\n<\/ul>\n
\u201cSolvency II\u201d type funding targets have now been postponed, but the other threats remain. So what is the true nature of this threat?<\/p>\n
It is easy to portray \u201cEurope\u201d as some massive irresistible force which can only be opposed by an increasingly immovable UKIP-type object. However, occasionally the curtain gets whipped away to reveal, Wizard of Oz style, a few technocrats frantically pulling the levers up and down to maintain the illusion of unquestionable authority.<\/p>\n
Gabriel Bernardino, the Wizard of EIOPA, certainly appears to be feeling the strain of maintaining this illusion. Last week<\/a> he suggested that EIOPA needed more power and more money, some of which needed to come from levies on \u201cthe industry\u201d, ie individual pension schemes.<\/p>\n
Coincidentally, the Pensions Regulator has also issued a report<\/a> on occupational pension scheme governance in the UK. There are 128 tables in its accompanying technical report but, picking out one or two statistics on each of the four of EIOPA\u2019s focus areas I have highlighted, it suggests that meeting the tougher regulations on governance and risk management is likely to cause UK pension schemes considerable problems.<\/p>\n
For instance, the 70% of small and over 50% (I\u2019m assuming this, the Regulator\u2019s summary of DB\/Hybrid medium schemes\u2019 responses only total to 90%) of medium schemes which have trustee meetings less frequently than once a quarter are unlikely to be seen by EIOPA as adequately providing \u201ccontinuous operational governance\u201d. As EIOPA\u2019s advice recognises (the italics are mine): \u201cmany IORPs do not have truly continuous operational governance (e.g. IORP governing bodies that meet monthly or less frequently<\/i>), so their operational characteristics fundamentally differ from insurance entities”. And the 3% or so of medium-sized schemes who admit to never having had a trustee meeting at all would I assume be seen as not providing operational governance at all.<\/p>\n
![\"a1\"](\"https:\/\/weknow0.co.uk\/wordpress\/wp-content\/uploads\/2013\/06\/a1.png\")
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<\/p>\n
Next up, if the requirements to establish that trustees are fit and proper persons to govern pension schemes were a worry, the revelation that 57% of small schemes and 41% of medium schemes have no training plan in place for its trustees will not help matters.<\/p>\n
![\"b1\"](\"https:\/\/weknow0.co.uk\/wordpress\/wp-content\/uploads\/2013\/06\/b1.png\")
<\/a><\/p>\nMeanwhile, it comes as a bit of a shock to those of us who thought that the Pensions Act 2004 did away with actuaries and other advisors acting as judge, jury and executioner of policy decisions for the pension schemes they represented, that 26% of small, 17% of medium and 18% of large schemes generally let their advisors take the lead on making decisions. Again this is not going to help trustees establish that they are fit and proper to govern their schemes.<\/p>\n
![\"d3\"](\"https:\/\/weknow0.co.uk\/wordpress\/wp-content\/uploads\/2013\/06\/d3.png\")
<\/a><\/p>\nIt might be hoped that trustees could have a reasonable stab at meeting the risk management requirements of their schemes. However, a stubbornly persistent 13-15% of small and medium schemes (both defined benefit and defined contribution) who have at the very least some form of risk register review it less than once a year.<\/p>\n
![\"e4\"](\"https:\/\/weknow0.co.uk\/wordpress\/wp-content\/uploads\/2013\/06\/e4.png\")
<\/a><\/p>\n
![\"i3\"](\"https:\/\/weknow0.co.uk\/wordpress\/wp-content\/uploads\/2013\/06\/i3.png\")
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