The Pensions and Lifetimes Savings Association (PLSA) has launched its very useful template to help Trustees of defined contribution (DC) arrangements in preparing their annual Chair’s Statements. The ‘Drafting Notes,’ in particular, are a really helpful reminder of what Trustees need to include and think about as we work through our Statements.
It’s a shame that it’s taken this long for such a template to be pulled together, and I question now whether many schemes – having done four or five of these – might feel they already have a reasonable blueprint from which to work. Nonetheless, I don’t think there can ever be too much guidance on these statements, and authored for the PLSA, by a collection of highly respected industry experts, it can surely only be a welcome tool for all DC scheme Trustees.
The Chair’s Statement is a lengthy process
The launch of the template should also offer a couple of timely reminders to those Trustee Boards with scheme year ends in March and April. Firstly, the sheer length of the template shows just how much detail the statement is expected to contain. What started off as a statement to give members comfort that their pension benefits are being well looked after, and provide details around how this had been achieved through the year, has morphed into a seriously hefty tome. And secondly, given the amount of information required, now is the time to start thinking about pulling these statements together because the gathering, verifying and interpreting of data can be a really lengthy process.
The threat of fines of up to £2,000 for incorrect statements looms large, particularly as the only assets in most DC arrangements are the members’ benefits. Trustees who find themselves on the wrong end of sanctions might then need to go cap in hand to the sponsoring employer, or have to pay the fine out of their budgets for the coming year; neither of which is a particularly desirable outcome. Indeed, it seems slightly perverse to me that fines might be met by a third party who wasn’t directly at fault for the breaches (the employer) or, at the potential detriment of members.
I don’t disagree with imposing fines per se, in fact, sadly, it seems that it is only the threat of financial penalties that is kicking some schemes into action. But it seems like such a blunt instrument; stick and carrot approaches might garner an instant reaction, but they rarely motivate people over the long term or drive genuine behavioural change. And in my view, it’s changing the mindset in this way, that is absolutely crucial. So, I’d like to see a more pragmatic approach from The Pensions Regulator, which – at the very least – considers the circumstances of the breach, but more importantly, gives direction on what can be done to put it right, and what tools and support the Trustees might need to do this.
I think most trustees (whether professional or lay) take their roles very seriously and have huge pride in what they do. They might just need a little nudge in the right direction when they veer off course now and again, so helping Trustees reflect and then improve would seem to be more beneficial to members and their benefits in the long term, than imposing fines.
20-20 Trustees are already preparing Chair’s Statement for our schemes
Within 20-20 Trustees we will be busy starting working on our scheme’s statements, and as my thoughts turn to the schemes that I am a trustee on and what we’ll need to address this year, it reminds me of exam time at school. I find myself asking myself whether I answered the question correctly? Did I write enough on the topic? Was my argument well structured? Followed up by a tense time sitting back to wait for the examination board’s response – in this case The Pensions Regulator – to receive feedback. If the new template can help overcome some of those concerns, then it’s going to be a huge help to Trustees and will hopefully free up some time to concentrate on making sure our schemes genuinely are well governed, and not just ticking boxes.
And when I’m writing mine, I’ll try and remember that, as a member of an award-winning trustee business, we’re doing some wonderful work on behalf of our schemes and their members. So, whilst it’s a painful process, the Chair’s Statement also gives us a great opportunity to shout about that!