The Department for Work and Pensions recently launched its consultation, “Trust-based pension schemes: Trustees and governance, building a stronger future.” The consultation seeks views on how the governance framework for trust-based pension schemes should evolve in light of the significant structural and regulatory changes affecting the UK pensions landscape.

The pace of change across pensions has accelerated markedly in recent years, with schemes increasingly facing complex strategic decisions around consolidation, endgame planning, surplus use and insurance risk transfer. Against this backdrop, the consultation focuses on how governance standards and trustee capability can continue to support good outcomes for members.

While the UK pensions system is strong in many respects, particularly in relation to funding and asset security, we consider that some areas of governance merit greater attention. In particular, administration remains a comparatively weak point in the system, despite its central role in ensuring that members receive the correct benefits.

Our response also highlights that the legal framework governing pension scheme trustees is broadly robust, but in practice it may not always receive the focus it deserves. Trustees currently have mandatory appointments in place for actuaries, auditors and, in most cases, investment managers. However, there is no equivalent requirement for schemes to retain legal advisers on an ongoing basis.

As schemes move closer to endgame decisions, including whether to pursue run-on strategies, extract surplus or transfer risk to insurers, the importance of clear legal process and a strong understanding of fiduciary duties will only increase.

Our full response explores these issues in greater detail, including how governance structures might evolve as consolidation continues and as trustees face an expanding range of strategic choices.

Our response

Our submission considers a number of the governance questions raised in the consultation, including:

• the current strengths and weaknesses of the governance framework for trust-based pension schemes
• the role of trustees’ legal duties and powers in supporting good decision-making
• the pressures on administration and the potential consequences for member outcomes
• whether the existing framework sufficiently supports trustees in navigating increasingly complex strategic decisions.

What’s next?

The consultation forms part of the government’s broader programme of pensions reform. As policy development continues, governance and trustee capability are likely to remain central themes, particularly as schemes progress toward consolidation and long-term endgame solutions.

Arc Pensions Law will continue to engage with developments in this area, and we look forward to contributing to future discussions on how the governance framework can best support trustees, sponsors and members alike.