As more companies switch their future pension provision to a DC Master Trust, the role of Governance Committees, already well established in the GPP world, is more important than ever. But how can you ensure you are getting the best from your Committee?

An engaged and diverse board makes good decisions

One of the first secrets to governance success is having the right people in the right place. Your Committee members need to be engaged! That may sound obvious, but many people sit on boards for the wrong reasons. Your board composition needs careful thought – it should have the right number overall (not too big, not too small) and be comprised of engaged and motivated individuals who form a diverse section of your workforce.

Whilst Finance/HR/Communications expertise is always useful, it’s important to consider how the Committee shapes up to the diversity in your business. For example, younger people at an earlier stage of their career, who may not always be called upon for such roles, may have much to add to debates on communications and issues such as climate risk. Additionally, a diverse board where members bring a variety of experience and background will make better decisions, having considered issues from all angles and engaged in rich debate. Good induction training and an ongoing programme of development are important in keeping your Committee members on top of the fast-moving world of DC pensions.

Optimal processes and policies

Great people alone won’t do the job! If your Committee isn’t well-organised with clear meeting arrangements, concise and relevant meeting papers, and the right things on the agenda, then you won’t be getting the best out of your Committee. Meeting at least quarterly will ensure important matters aren’t left too long, and training or ad hoc meetings in-between are easy enough to arrange in our nimbler, post-Covid online meeting world. Key strategic items for ensuring progress and decisions are made should be dealt with first, and papers should be read beforehand so that meeting time is devoted to discussion and debate.

Clear Terms of Reference set up a Committee well to ensure everyone understands the remit and objectives of the board. A simple risk register can then be created, with a risk defined as that which hinders objectives being met. Other policies can be useful too such as one to demonstrate how the board has considered cyber risk or training requirements.

A key area for each meeting will be provider scrutiny and the provider should be invited along to a section (but not all) of the meeting to present their Governance report, the latest ideas and developments, and answer searching questions from the Committee! The provider market is developing all the time, with many investing heavily into their Master Trust propositions in particular. Ensuring the Committee can ask the questions that get to the heart of how your provider is keeping up with the market is an important part of meeting structure. In the closed section of the meeting, the Committee should agree the most important points to put to the provider.

Great support and advice

Your Committee won’t function without a really good secretary and quality advisers that can keep you up-to-date on the latest DC governance and investment innovation, plus the latest on the provider market. To get the very best from your Committee, the triangle of board members, secretary, and advisers should be well balanced with a good collaborative approach and everone clear on their roles and responsibilities.

Aligning with corporate strategy

Many Governance Committees are now getting to grips with the importance of both aligning with wider corporate policy and influencing such policy. For example, climate risk is very high on pension scheme agendas, and the transition to a low-carbon economy and tackling this risk is undoubtedly important to many sponsors too. Ensuring your Governance Committee both feeds in to, and works with, your corporate strategy is a great way for your employees to recognise pension scheme progress and engage with their retirement savings.

A highly engaged and knowledgeable board supported by great advice, appropriate governance structures and properly aligned with corporate philosophy will ensure you get the most out of your Governance committee.

I hope you find this blog useful. If you have any questions about setting up a governance committee, or would like to discuss your current governance arrangements, please get in touch.