Engaging with the Pensions Authority Supervisory Review Process

The SRP involves several key stages.  The process typically begins with a request from the Pensions Authority for relevant documentation and information from the trustees of the selected scheme. Following this, an initial review of the submission is carried out by the Authority to identify potential risks to the scheme and its members and/or non-compliance with regulatory requirements.  Trustees may then respond to the issues identified, including supporting evidence as appropriate.  Trustees are then invited to an in-person interview with the Authority, where they discuss the issues highlighted and address any additional queries. A preliminary findings report is then issued to trustees, who are given the opportunity to make additional submissions for consideration before the report is finalised. The Authority then issues the final findings report to the trustees.

Failure to address issues highlighted within the final findings report within timeframes specified by the Authority may result in the imposition of sanctions.  The Authority may issue an advisory notice requiring trustees to take certain action(s) within a specified timeframe. Failure to comply may lead to court prosecution or on-the-spot fines. 

Final findings reports are not public documents and their primary functions can be seen as being to inform the Pensions Authority in relation to governance and compliance issues as well as to assist the Authority in carrying out its forward-looking supervisory role by formalising the process for communicating directly with scheme trustees in relation to individual schemes.  That said, such reports would also appear to have the potential to impact on trustees (and by extension employers) from a reputational perspective as well as master trust providers from a business perspective.   

The 2024 Findings Report 

The Authority recently published a report of their findings on supervisory activities in 2024.  The report is based on their review of six master trusts, one large defined contribution scheme, and one large defined benefit scheme.  Given that the SRPs carried out in 2024 focused on master trusts, the findings of the report do highlight certain issues that may not be experienced by all schemes.  That said, most trustee groups will find the report of interest. 

The report focuses on six specific areas of risk: 

1. Governance Issues

In assessing governance issues, the Authority focused on matters including trustee decision-making processes, conflicts of interest, oversight of service providers, and board policies and procedures. 

The report notes concerns regarding the recognition of conflicts of interest, particularly as master trusts are often closely affiliated with their founding organisations.  It is imperative that trustees are capable not only of identifying conflicts of interest but also of implementing measures to mitigate the associated risks.

Upon reviewing the policies and procedures furnished, the Authority discovered numerous instances where the language was either directly copied from the Authority’s Code of Practice or contained overly generic wording which had not been customised to the specific scheme. It is essential that all policies contain sufficient scheme specific details, and trustees are expected to maintain comprehensive records related to their policy review processes.

2. Operational Challenges

The Authority conducted a thorough review of contracts with administration service providers and investment managers.  Issues were identified concerning suitable indemnifications for the scheme. Many contracts lacked clear recourse for trustees in the event that service levels fall below the agreed standard, and there were instances where the service provider's liability was limited in the event of financial loss to the scheme. 

The Authority also identified failures by trustees to take appropriate action in response to breaches of service level agreements and to enforce provisions contained within the contracts.  It is clear that this area will continue to be a focus for the Authority.

Additionally, critical reviews of service providers carried out by trustees were examined, and it is clear that the expectation is that these reviews should clearly articulate the reasons for retaining the current provider rather than considering alternatives. 

3. Risk Management Deficiencies

The report highlights that trustees are required to take ownership of their scheme’s own-risk assessment process, which the Authority considers to be central to a scheme’s governance. In some cases, there was no evidence of trustee involvement prior to the own-risk assessment being signed off. Some own-risk assessments did not consider all risks such as outsourcing risks, scheme viability and sustainability risks. It is essential that the implications of the own-risk assessment and its findings are fully understood by the trustees. 

4. Communication Shortcomings

The report noted that the Authority expects trustees to have a member engagement policy in place. Some of the reviewed policies were lacking in detail and lacked clarity about trustees’ oversight of communications provided by advisors and brokers. The Authority also observed instances of member complaints not being progressed in a timely manner and a lack of trustee oversight over member complaints. 

5. Investment Concerns

Investment objectives were not clearly identifiable in some schemes, making it impossible to measure performance relative to these targets. It was observed that, in certain instances, trustees concentrated on the performance of investments relative to the market rather than the specific investment objectives outlined in the statement of investment policy principles. Additionally, the minutes of board meetings did not provide sufficient evidence of thorough discussions on investment performance.

Furthermore, it was not always evident how trustees determined that their default investment strategy was appropriate for their members. 

6. Fees & Charges 

The Authority expects trustees to evaluate the value for money provided by a scheme in relation to the benefits and services offered, especially when compared to other available options. In some instances, there is insufficient evidence that trustee boards have established processes for monitoring and benchmarking scheme charges. 

The Authority considers that participation in the Cost Transparency Standard will enable trustees to better understand investment costs and benchmark these costs against other options. It is expected that schemes not participating in the Cost Transparency Standard process should have equivalent data available.

How Can We Help?

Based on our experience assisting clients with the SRP since its introduction (and as emphasised by the Authority on a number of occasions over recent months), the ideal position would be that all core scheme documentation is in place and up-to-date before the process begins. While the trustee interview holds some importance, it is secondary to having well-organised documentation ready for provision to the Authority which allows the trustees to demonstrate appropriate governance standards.  This will include well drafted and comprehensive meeting minutes as well as scheme specific and appropriately detailed policy and procedure documents.  In many cases, policy and procedure documents will need significant work to bring them to the standard expected by the Authority.

If you require assistance or are interested in learning more about how we can help you navigate the SRP, please don’t hesitate to reach out.  Our team is here to support you through every stage of the SRP, from preparation for engagement through to dealing with the recommendations of the final findings report.