Steve Butler of Punter Southall Aspire highlights the importance of pension governance meetings to protect against mistakes and safeguard company reputation
Workplace pensions are becoming ever more complex to manage, due to increased regulation and constantly changing legislation. Good governance is critical and it’s vital that regular governance meetings take place to make sure workplace pension schemes are well-run.
A recent case in point was a first pension governance meeting with a new client. As the meeting progressed, the numbers didn’t add up and the client became concerned. The company’s pension contribution levels just didn’t match what they had expected to see.
This got alarm bells ringing and it was decided that a thorough look at their pension contribution levels was needed after the meeting. This is when it was discovered that for several years, they’d been deducting employee contributions from gross pay, whereas they should have been deducted from net pay. This had serious implications for the pension tax relief that had been incorrectly granted.
Luckily, there was a happy ending. Not only was the problem identified, it was fairly straightforward to sort out with HMRC and the pension provider. However, had the error not been uncovered, it’s anybody’s guess how long this issue would have carried on for, which could have made sorting it out a later stage far more complicated.
So why are governance meetings important, and what exactly should a good governance meeting cover?
Governance meetings are a crucial mechanism to catch mistakes early and ensure that your workplace pension scheme is delivering the best possible value.
When planning a governance meeting, one of the first steps is to make sure the appropriate people attend. As well as HR, it’s important to have a good mixture of staff representatives and senior management. This helps ensure that the meetings and action points are taken seriously and that there is a high level of ideas.
Having the right mix of staff in the meeting also helps improve employee engagement with workplace pensions throughout the business. Employees who attend these meetings feel empowered because they are part of the decision-making process. As a result, they are more likely to cascade information throughout the company, and, when staff can see that the business cares about their pension scheme and manages it carefully, then they tend to care more too.
Once the meeting is scheduled, plan an agenda and circulate this a few days in advance of the meeting. During the meeting it’s also good to work from a checklist, to ensure all the important points are well covered.
Here are some of the key things this should include, and which every governance meeting needs to run through:
How is your pension scheme doing? Don’t just look at the bottom-line figures – consider whether you are getting value-for-money and benchmark against other retirement plan providers. Most importantly, think about whether the members of your pension scheme will have enough to have the lifestyle they would like when they retire.
How much are your employer contributions? How are they structured? Again, benchmark the quality of what you do against the rest of your sector, as well as against government recommendations. If you want your scheme to attract and retain staff, you can’t fall behind with your employer contributions or let the structure of your pension plan become outdated.
What are the changes to workplace pensions you need to be aware of? And which new regulations are going to affect you? You must stay up-to-date to avoid getting caught out by the regulator and falling behind your competitors.
How well are your employees engaging with their pension scheme? How many people are opting in, and how many are opting out? This will give you an indication of how valuable they perceive the workplace plan to be, and whether you are getting the maximum benefit from your investment.
Do your employee communications provide relevant and valuable information regarding your pension scheme? And how successful are those efforts? Often companies go to great lengths to produce information but fail to tell employees where it is, such as having content on an intranet that no one uses.
This is something all good governance meetings should end with – concrete next steps, so that all areas of concern are dealt with. The next meeting should go through this at the start, to ensure everything has been done, and prioritise anything that hasn’t.
Pension governance meetings don’t guarantee that mistakes are never made but they will help ensure they are caught early. Given the risks involved, including fines and potential reputational damage – isn’t that worth its weight in gold?
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