Just three in 10 (30 per cent) pension schemes have taken action on each of the top three expectations in The Pensions Regulator’s (TPR) upcoming General Code, WTW’s Trustee Governance Report 2023 has found.

Furthermore, only 6 per cent have completed all three top expectations so far.

This is despite nearly three quarters (72 per cent) saying they are aiming to be either ‘best in class’ or ‘better than many schemes’ on governance.

WTW’s report found that the regulator’s General Code was cited as the most important governance challenge facing pension schemes.

The consultancy noted that the majority of schemes still need to complete one or more of: Trustee board training on the code; undertaking a gap analysis relative to the code; or reviewing the way the scheme does risk management.

However, almost all of those remaining said these were in progress or planned to complete them this year.

The report found that 60 per cent of schemes with £5bn or more in assets had undertaken a gap analysis, while just 20 per cent of schemes with less than £500m had done so.

“Schemes have high ambitions when it comes to governance preparations for the General Code that will come into force this year,” commented WTW pensions governance consulting lead, Jenny Gibbons.

“But progress has been slow in the last 12 months and, outside of the top three expectations, little has been done to date.

“The new code is anticipated to be laid before parliament imminently and schemes will then have a short period of time before the code is formally in place.

“We would encourage schemes to identify their governance gaps now and make a prioritised plan for meeting them, if they haven’t already, so that they are well placed once the code comes into effect.”

In response to the code’s expectations, 74 per cent expect the trustee board to pick up responsibility for providing the new mandatory role of risk management function, while 51 per cent expect trustee boards to be responsible for providing the role of internal audit function.

WTW noted that, as 97 per cent expect the trustee board size to stay the same or reduce in the next two years, it is likely that these new responsibilities will fall to existing trustees or within the sub-committee structure.

These responsibilities and meeting the code’s other expectations could lead to an increase in time and focus expended on governance for trustees, according to WTW.

Its report found that the boards of the largest schemes were already spending nearly 900 hours a year fulfilling their duties, and the majority of trustees feel that their role has become significantly riskier (82 per cent), more difficult (74 per cent) and harder to recruit for (73 per cent).

The report stated that the presence of an independent professional trustee was helpful for other trustees on the board.

Over three quarters (76 per cent) of schemes had an outsourced administration team, 45 per cent had an outsourced secretariat and 24 per cent had appointed a delegated investment/fiduciary manager to help alleviate pressure.

“In response to the increasing burden placed on trustees, and without the option to increase the size of the board, it is encouraging to see pension schemes exploring other ways to alleviate pressure and ease recruitment difficulties,” said Gibbons.

“Many schemes have made the important connection between board effectiveness and equality, diversity and inclusion and have recognised that changes to recruitment and working practices are needed in order to attract a more diverse group of candidates to trusteeship and then make best use of their talents.”

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