Protecting Trustees and Pension Schemes
Lawrence Churchill, Chair of NEST Corporation, responsible for probably the world’s fastest growing pension scheme, described what he believed constituted good governance for defined contribution pension schemes at our Annual Meeting. He began his speech by paying tribute to OPDU’s leading role in providing insurance and risk services to trustees.
NEST is a new workplace pension scheme for low to moderate earners and has been designed to meet the challenge of companies having to ensure employees join a pension scheme automatically where there is not already an appropriate scheme in place. This new requirement will commence in the Autumn with the largest companies affected first, and then be rolled out over the next five years.
Lawrence drew upon the governance structure NEST had put in place which aimed to support the requirement to act in members’ “best interests” which was not just the financial interest of obtaining the best return, but included broader areas such as having clear and low charges and jargon busting. He believes that governance should be proportionate to individual scheme circumstances and should not just be about cloning the approach taken by NEST. Lawrence concluded his address by looking ahead to future possible trends and predicted a healthy future for trust based pension schemes.
Jonathan Bull, OPDU’s Executive Director, had opened the Meeting welcoming the audience of 150 which included several eminent people from the pension’s community. Peter Murray, Chairman of OPDU’s Advisory Council, then summarised the work undertaken by OPDU in the last twelve months. OPDU continued to provide the most comprehensive cover and support and was delighted to announce the introduction of lifetime cover for retired trustees which was designed to provide valuable peace of mind for individuals undertaking the onerous task of trusteeship. Another successful year for OPDU had seen its membership increase to 775 schemes with scheme assets of approximately £180 billion. Last year had also seen the launch of NEST which, together with the introduction of auto-enrolment, would potentially transform pension provision in this country. After being invited to tender, OPDU was delighted to welcome NEST Corporation and its trustees as an OPDU member.
The Chairman highlighted OPDU’s ability to routinely be able to provide cover of up to £30 million which was twice the market norm although higher limits could be arranged and £100m was currently the highest limit taken by a large OPDU member with several schemes insured under their policy. OPDU was also able to provide cover for the growing number of schemes being discontinued or wound up.
The Chairman reviewed examples of recent claims and notifications which were set against a background of continued financial turmoil. He concluded his address by congratulating those OPDU members whose schemes had been recognised by winning a number of leading industry awards.
Finally, Stephen Soper the Executive Director for defined benefit funding at the Pensions Regulator, gave a flavour of what was expected of pension scheme trustees for the coming year, highlighting what he believed was a flexible framework for sponsors and trustees against a challenging economic background. He announced that the Regulator will publish a statement in April to help trustees dealing with scheme valuations and recovery plans, setting out expectations of trustees starting the valuation process. The statement will be updated annually. The aim of the guidance is to reduce the number of recovery plans which would need to be scrutinised in depth or challenged by the Regulator. Stephen also summarised the Regulator’s views on contingent assets, de risking and other corporate transactions and advised that it would be publishing details of cases in which it had been involved to assist trustees in understanding how the Regulator had used its powers, and in certain cases reached non-standard agreements. In summary, the Regulator was looking to adopt a more focused and proactive approach with the aim of interfering less in well- run schemes.
Following a lively and interesting question and answer session, a Reception was held with Reed Smith’s offices providing outstanding panoramic views of London’s changing skyline.
OPDU protects pension schemes by providing unique insurance cover to trustees, administrators and sponsoring employers.
Pension funds holding total combined assets in excess of £180 billion have joined OPDU.