Pension Scheme Governance
How are workplace pension schemes governed? Understand trustee duties, Independent Governance Committees, and member protection.
Last updated: 30 January 2025
Good governance protects pension scheme members.
Why Governance Matters
Purpose
| Reason | Detail |
|---|---|
| Member protection | Primary goal |
| Value for money | Ensuring |
| Proper management | Of funds |
| Accountability | To members |
Regulatory Focus
| Regulator | Emphasis |
|---|---|
| TPR | Governance standards |
| FCA | Fair treatment |
| Both | Member outcomes |
Trust-Based Schemes
Trustees
| Role | Detail |
|---|---|
| Legal owners | Of scheme assets |
| Fiduciary duty | To members |
| Manage scheme | Day to day |
| Accountable | Legally |
Trustee Types
| Type | Description |
|---|---|
| Member-nominated | Chosen by members |
| Employer-appointed | Selected by employer |
| Professional | Paid experts |
| Independent | External appointment |
Trustee Duties
| Duty | Detail |
|---|---|
| Act in members' interest | Primary duty |
| Invest prudently | With care |
| Avoid conflicts | Of interest |
| Comply with law | Regulations |
| Monitor administration | Quality |
Contract-Based Schemes
Structure
| Element | Detail |
|---|---|
| Insurance contract | Basis |
| Provider owns | Assets |
| Individual contracts | With members |
| No trustees | As such |
IGC Requirement
| Must Have | Detail |
|---|---|
| Independent Governance Committee | Required |
| For workplace | Pensions |
| Provider pays | Costs |
| Independent | Of provider |
Independent Governance Committees
Role
| Function | Detail |
|---|---|
| Assess value | For members |
| Challenge provider | On issues |
| Report publicly | Annually |
| Represent members | Interests |
Composition
| Requirement | Detail |
|---|---|
| Majority independent | Of provider |
| Chair independent | Always |
| Relevant expertise | Required |
| Diverse views | Encouraged |
Annual Report
| Must Cover | Detail |
|---|---|
| Value assessment | Of scheme |
| Default fund | Performance and suitability |
| Charges | Analysis |
| Service quality | Assessment |
| Improvements | Made or needed |
Governance Standards
For Master Trusts
| Requirement | Detail |
|---|---|
| Authorisation | From TPR |
| Fit and proper | Persons |
| Financial sustainability | Viable |
| Systems adequate | Processes |
For Contract-Based
| Requirement | Detail |
|---|---|
| IGC in place | Operating |
| Value assessment | Annual |
| Public reporting | Transparency |
| FCA oversight | Regulation |
What Good Governance Looks Like
For Members
| Indicator | Sign |
|---|---|
| Low charges | Value focus |
| Good communications | Clear information |
| Easy access | To account |
| Quick responses | To queries |
For Scheme
| Indicator | Sign |
|---|---|
| Regular reviews | Of investments |
| Charge monitoring | Comparison |
| Service standards | Measured |
| Member feedback | Considered |
Default Fund Governance
Special Focus
| Requirement | Detail |
|---|---|
| Regular review | Of default |
| Suitability check | For members |
| Performance monitoring | Benchmarks |
| Cost assessment | Charge cap |
Statement of Investment Principles
| Document | Contains |
|---|---|
| Investment aims | Objectives |
| Risk approach | Strategy |
| ESG considerations | Increasingly |
| Review frequency | Regular |
Employer Role
Limited Involvement
| Position | Detail |
|---|---|
| Choose scheme | Initial decision |
| Pay contributions | On time |
| Provide data | Accurately |
| Not governance | Role |
Cannot Influence
| What | Position |
|---|---|
| Investment decisions | Trustees' job |
| Individual members | Their choice |
| Scheme rules | Fixed |
Member Involvement
Trust-Based Schemes
| Right | Detail |
|---|---|
| Nominate trustees | Often |
| Receive information | Required |
| Raise concerns | With trustees |
| Access accounts | Online |
Contract-Based Schemes
| Right | Detail |
|---|---|
| Read IGC report | Public |
| Make complaints | To provider |
| Access ombudsman | If needed |
| Switch funds | If wanted |
Complaints and Disputes
Internal Process
| Step | Action |
|---|---|
| Raise with | Provider/trustee |
| Internal procedure | Followed |
| Response | Required timescales |
| Escalate | If needed |
External Recourse
| Body | Role |
|---|---|
| Pensions Ombudsman | Disputes |
| TPR | Regulatory issues |
| FCA | Contract-based |
| Financial Ombudsman | Some issues |
Regulatory Oversight
The Pensions Regulator
| Function | Detail |
|---|---|
| Authorises | Master trusts |
| Sets standards | Governance |
| Enforces | Compliance |
| Takes action | If problems |
FCA
| Function | Detail |
|---|---|
| Regulates | Contract-based |
| Oversees | IGCs |
| Consumer protection | Focus |
Value for Members
Assessment Areas
| Area | Consideration |
|---|---|
| Charges | Competitive? |
| Returns | Reasonable? |
| Service | Good quality? |
| Communications | Clear? |
| Administration | Efficient? |
Comparison
| Against | Benchmarks |
|---|---|
| Similar schemes | Performance |
| Market rates | Charges |
| Service standards | Industry |
Future Developments
Increased Focus
| Trend | Detail |
|---|---|
| More scrutiny | Of governance |
| ESG integration | Investment |
| Member outcomes | Focus |
| Consolidation | Smaller schemes |
Dashboard Impact
| Coming | Changes |
|---|---|
| Pensions dashboard | Visibility |
| Easier comparison | For members |
| Competitive pressure | On schemes |
Summary
Key Points
| Element | Detail |
|---|---|
| Trustees | Trust-based oversight |
| IGCs | Contract-based oversight |
| Member focus | Primary duty |
| Regulatory supervision | Both types |
For Members
| Protection | Detail |
|---|---|
| Someone watching | Your interests |
| Independent oversight | Required |
| Complaints process | Available |
| Transparency | Through reports |
Related answers
Pension Default Funds
What is a default pension fund? Understand where your auto-enrolment contributions go and how default investments work.
Pension Master Trusts
What is a master trust pension? Understand multi-employer pension schemes, authorisation, and why most auto-enrolment schemes are master trusts.
Qualifying Pension Scheme
What is a qualifying pension scheme? Understand the requirements for auto-enrolment pension schemes.
Frequently Asked Questions
- Who oversees my workplace pension scheme?
- Trust-based schemes (like master trusts) have trustees who act in members' interests. Contract-based schemes (like Group Personal Pensions) have Independent Governance Committees (IGCs) that assess value for money and challenge providers on members' behalf.
- What do pension trustees do?
- Trustees are legally responsible for running the pension scheme in members' best interests. They select investments, monitor charges, ensure compliance, handle disputes, and oversee administration. They have legal duties and can be held accountable.
- What is an Independent Governance Committee?
- IGCs are required for contract-based workplace pensions. They're independent of the pension provider and assess whether the scheme offers value for members. They publish annual reports on charges, service quality, and default fund performance.