Why good governance is more than a tick-box exercise
At our recent Governance Matters roundtable, hosted in partnership with Sackers, we discussed what good governance truly means for trustee boards today. Too often, governance is viewed as just another compliance hurdle. But we believe it’s so much more.
When approached thoughtfully, good governance helps schemes make better decisions, manage risks effectively, and, most importantly, improve outcomes for members. Ultimately, it’s about building a resilient and effective pension scheme that puts member outcomes first.
The power of the Own Risk Assessment (ORA)
As The Pensions Regulator (TPR) is expected to monitor board effectiveness more closely, it’s a wise move for trustee boards to proactively carry out reviews.
Our discussion began with a reminder of the requirements of the Effective System of Governance (ESOG) and the Own Risk Assessment (ORA). These tools provide a structured way for trustees to evaluate their governance across key areas, including investments, risk management, and administration.
A well-designed ORA is not just a tick-box exercise; it’s a critical tool that helps you identify weaknesses and prompts action. It also gives trustees confidence that their governance is working as it should, and these assessments can often be completed cost-effectively, as described below.
Elevating board and adviser relationships
We encourage trustees to reflect on their board’s effectiveness by asking a few key questions:
How long has it been since your last board review?
Have you recently onboarded a new trustee or chair?
Has your board remained largely unchanged for many years?
Are you looking to begin a significant project? These are often the moments when a review adds real value. At Vidett, we use tools like psychometric assessments like Strengthscope to help us identify people’s strengths and weaknesses and this kind of assessment could similarly benefit boards.
We’ve seen firsthand how such reviews can lead to significant improvements. In one case, a board used a combination of self-assessment, adviser feedback, and psychometric testing, which led them to revisit their sub-committee structure. Another review highlighted team dynamics that weren’t obvious day-to-day, resulting in an action plan focused on strategy, relationship management, and training.
Beyond the board, managing adviser relationships is crucial. We asked pension managers: are their clear objectives for the scheme’s advisers? Are clear and transparent budgets in place and monitored? One recommended practice is for boards to conduct annual performance reviews of their advisers, providing structured feedback that is delivered to them in order to build more transparent and collaborative partnerships.
Ensuring robust administration and policy oversight
Administration is one of the most critical elements of governance. Administrators are often the main point of contact for members, so poor service can quickly erode trust.
We shared an example of a large defined benefit (DB) scheme that was experiencing declining service-levels and a growing number of member complaints. An in-depth review highlighted that the scheme would be better handled by a larger team with more experience. The Trustee was able to set clear expectations with the new team, defining service-levels, and updating member communications. This process ensured that the Trustee was able to restore member confidence and improve member outcomes.
Implementing policies
Finally, policies, too, should be tested rather than simply filed away. We recommend scenario testing, where appropriate, such as running through an incident response plan, to highlight whether trustees are confident in their roles and whether the timescales are realistic. For those policies which can’t be tested, ensuring that they are regularly reviewed to ensure that what is written is being done, and seeing if there is any room for improvement.
Ultimately, governance is not just about oversight; it’s about building a resilient and effective pension scheme that puts member outcomes first.
For further information, please contact Claire or Curtis from our Governance team.