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‘Nobody puts governance in a corner’

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We all remember “Nobody puts Baby in a corner” from Dirty Dancing. Clearly nothing to do with pension scheme governance, but bear with me!  Governance isn’t the most exciting topic in the world – we know that. It’s not a great conversation opener at a party, nor can it be described as particularly fun.

But (and yes there is a but!) it is very important. Having a robust governance framework in place saves time, improves decision making, leads to increased efficiencies and ultimately better outcomes for members. Trustees need to understand this and recognise the value it brings.

We need to move away from positioning governance as something we just have to do in order to satisfy the regulator. Blindly completing checklist after checklist, with no perceived value, adds nothing. It becomes a box-ticking exercise, and in time-constrained trustee meetings, it’s no surprise that these things can be pushed right down the agenda. Trustees, and in particular lay trustees, need to understand why we need the various registers and policies in place. They need to appreciate, for example, that if there is a comprehensive, maintained list of key compliance risks covering when certain events are due (e.g. the expiry of the MNT term of office, or when the conflicts policy was last reviewed), it will save time and money in the long run rather than having to trace these things retrospectively.

That said, governance is more than just being organised. Real life situations need to be woven into discussions, so that the relevance is better understood. Take cyber security as a good example. It’s all very well suggesting to a board of trustees that a (let’s face it, fairly dry!) checklist is populated with the necessary compliance details, but surely the most important point here is how to deal with an actual real-life situation. This may involve an interactive training session or scenario testing, but the end result should be that the roles, responsibilities, timescales and escalation points are all known, understood and documented. Then, in the event of the worst happening, everyone knows what to do, who to speak to and by when – without the need for panic and frantic meetings.

Members will ultimately benefit from strong governance structures being in place. At the end of the day, they are the reason the pension scheme exists in the first place.

Therefore it is vital that advisors position governance as fundamental to the effective running of the scheme. The 21st Century campaign has certainly raised its profile, but there is still plenty more we can do. Governance is equally as important as scheme funding and developing an appropriate investment strategy, and should be treated as such. It should be discussed in a proactive, positive, engaging – and, importantly, interactive  – way, and definitely not left to the last 5 minutes of a trustee meeting when everyone just wants to go home!  If time is an issue, it is worth considering setting up a governance sub-committee. This will allow dedicated time and resources to consider the key issues and risks, and to report back to the full board.

Members absolutely, and rightly, expect the highest standards of governance to be in place. Let’s make sure that 2019 is the year when we take governance out of the corner: we stop ignoring it and raise those standards as high as we can, so that they shine!

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