Finding hidden value in your investment governance

The Pensions Regulator is clear in its guidance – all trustee efforts should be focused on achieving one outcome: paying pensions to members of the scheme as they fall due.

The Pensions Regulator is clear in its guidance – all trustee efforts should be focused on achieving one outcome: “paying pensions to members of the scheme as they fall due and paying them in full”. It sounds straightforward, but then follows numerous further pages of guidance on what good governance means.

Three key risks are identified that trustees should be aware of: covenant risk, funding level and investment risk. Each of these risks are in a constant state of flux, and each of the three impacts the other two. To make matters more difficult, trustees tend to meet only 4-6 times a year. Trustees may be able to fulfil their legal duties to scheme members by operating strict processes or delegating decisions.

At LGIM, we know governance is top of mind for many of our clients and so the following paper sets out some practical ways for trustees to not only meet their legal obligations, but also to pay all pensions. Here we focus on investment governance rather than governance in general (which includes things like administration, managing conflicts of interest, keeping members informed and so on). However some of the principles could also apply more broadly.