Back to basics - What is the chair's statement?
Occupational pension schemes providing defined contribution benefits, other than those arising from additional voluntary contributions (AVCs), are required by law to prepare an annual statement, signed by the chair of the trustees, within seven months of the end of each scheme year.The statement should set out the ways in which the scheme is complying with a variety of legal governance standards incumbent upon it. The Pensions Regulator ("TPR") provides detailed guidance about producing a chair's statement, including a "quick guide".
The chair's statement is currently the only way by which members have a legal right to obtain information on costs and charges.Therefore, it is mandatory for key details (for example, the scheme's statement of investment principles etc, see a full list here) to be accessible online for free and written in plain English.
Although the chair must sign the statement, it's actually the duty of the scheme's whole trustee board to make sure that the scheme is compliant with governance obligations.
Recent fines imposed by The Pensions Regulator
TPR has issued a number of fines in cases where trustees have failed to include the required information in their annual statements. In August 2019, TPR fined the National Employment Savings Trust for inadequacies with its chair's statement and TPR continues to demonstrate that it will not hesitate to impose penalties where regulations in relation to chairs' statements fail to be complied with. For example, in quarter 3 of last year TPR issued a £2,000 fine (the highest TPR can levy for this type of breach) to the Financial Conduct Authority's (FCA) Pension Plan.
Whilst reviewing the scheme's previous statements as part of the scheme's application to become an authorised master trust, TPR found that the scheme's 2018 statement contained insufficient information on the ongoing training provided to the trustee board, which is essential to keep up the trustees' understanding of the scheme's governing documents. The statement also failed to state the date that the scheme's investment strategy was reviewed, and certain historical data on charges and costs.
In response to the fine, the trustees of the scheme apologised to members and rectified their internal procedures to ensure that their 2019 statement was compliant. The master trust application was then approved by TPR in November 2019.
Alongside the FCA Pension Plan, TPR revealed that it has also issued fines of £2,000 to The Salvus Master Trust and Accenture Retirement Savings Plan in relation to non-compliant chair's statements.
If you would like to discuss anything raised in this blog, please get in touch with your usual contact at Brodies.
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