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COVID-19: Scheme governance issues Trustees should consider

Judith Hetherington, Partner, Pensions Funds Group 
04/06/2020
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Following the start of the lockdown, Trustees will have received assurances from their advisors that the restrictions on everyday life, put in place following the outbreak of the COVID-19 pandemic, have not affected the key operations of their scheme.

We have provided a summary of some of the governance issues and risks that Trustees should consider to ensure that the scheme objectives continue to be met, and facilitate the smooth operation of their scheme:

Trustee effectiveness

  • Are virtual meetings running smoothly and are they fit for purpose?
  • Are Trustees receiving the right information, at the right time to enable them to make the right decisions?
  • Is the current decision making and approval process fit for the current climate?
  • Are the Scheme’s contingency plans up to date, and do they reflect the current position?
  • Do the Trust Deed & Rules need amending to allow the new way of working?
  • Do signing authorities allow for electronic signature?
  • Are additional resources available from advisors if required?

Administration

  • Are the administrators able to continue operations fully remotely or are there limitations? 
  • Is there adequate resources at the administrator to cover staff on sick leave?
  • How are administration services being prioritised?
  • What changes have been made in the operating procedures at the administrator?
  • Are the existing controls and procedures in place still fit for purpose?
  • How is cashflow being managed?
  • What communication should be sent to members?
  • Are contributions being accurately paid and recorded for furloughed staff?
  • Have the ad-hoc projects that were put on hold, now become critical to the success of the pension scheme, and are there adequate resources for these?

Covenant and Funding

  • What has been the effect on funding levels?
  • Has the sponsor’s covenant been materially affected?
  • Can the sponsor meet its current contribution arrangements?
  • Do the Trustees need to increase the engagement with the sponsor?
  • Is there is an opportunity to introduce a contingent asset or additional security?

Investments

  • Is the Scheme’s disinvestment policy still appropriate in light of recent changes in values of investments?
  • Is the investment strategy such as investment triggers still fit for purpose?
  • Should the Trustees make short-term tweaks to minimise further downside risk?
  • Are proposed investment transitions still appropriate?
  • Does the Scheme need to hold additional cash resources?

Fraud

  • Are messages being communicated to strengthen a culture of integrity and to deter the dishonest minority?
  • Are high risk areas (both internally and externally - people, suppliers, etc.) being profiled?
  • Are advanced data science techniques being deployed to detect anomalous behaviour and payments?
  • Do third party suppliers have access to a capacity to undertake lawfully proper remote investigations in the context of current social distancing rules?
  • Do they need information and intelligence as the threat of fraud develops and evolves across the economy?

How we can help

We believe that the continued success of your pension scheme in providing the best possible outcomes for members, is dependent on ensuring that you have considered the effect of the current situation on these five main areas.

In the coming weeks we will providing you with further insight into each of these areas to assist you in this process but if you wish to discuss this further then please contact us.

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Contact us

Judith Hetherington
Judith Hetherington
Partner, Pensions Funds Group
London & Midlands