January 2013 Pension Scheme Governance for Trustees Programme Overview of our Pension Scheme Governance for Trustees Programme
Pension Scheme Governance for Trustees Programme at Mayer Brown WHAT IS PENSION SCHEME GOVERNANCE? Pension scheme governance is a systematic approach to ensuring that trustees carry out their duties. Our approach, whilst being compliance-based, is also pragmatic. It integrates the Pensions Regulator s priorities within a broader governance structure which distinguishes mandatory requirements from aspirational best practice guidance. Our Pension Scheme Governance for Trustees Programme consists of two core elements: governance reviews, and a trustee knowledge series comprising events, courses and publications. GOVERNANCE REVIEWS Our governance reviews are structured around six basic areas, but we can address any of these areas individually. The trustee board Trustees have a variety of duties that demand an array of skills. We can help trustees develop processes which form the basis for effective decision-making and we can design: suitable trustee board structures and committees with appropriate delegation; terms of reference; conflicts of interest policies and procedures; confidentiality agreements and procedures; MNT arrangements; and trustee extranets containing scheme documents, agendas, trustee meeting papers and events diaries. We can also review trustee protections (exonerations, indemnities, insurance). Legal documentation The trust deed and rules are the basis upon which the scheme is administered and benefits are paid. Trustees have a duty to ensure that scheme members and beneficiaries receive the benefits due to them. Discrepancies between the rules, booklets and other relevant documentation can be a source of serious and expensive claims. We can: review the scheme s trust deed and rules to determine whether they need to be updated; re-draft trust deeds and rules to make them more user-friendly; mayer brown 1
prepare a consolidated trust deed and rules to ensure that the relevant parties (trustees, sponsors, administrators, actuaries) are working on the basis of an up-to-date document; and review member communications (including booklets and announcements) for consistency with the trust deed and rules. Internal controls Trustees have a statutory duty to establish and operate internal controls to ensure that the scheme is administered and managed in accordance with its trust deed and rules and the law. We can help trustees: identify their objectives; design a risk register to assist in monitoring and reviewing the risks that may prevent those objectives from being achieved; and factor those risks into the scheme s business plan. The sponsor Trustees of defined benefit schemes must operate under the statutory scheme funding regime. This regime requires the trustees to be able to enter into complex financial negotiations with sponsors, to understand the sponsor s covenant, and to understand the sponsor s group structure. We can help trustees: understand the interaction between the scheme s rules and their powers under the scheme funding regime; understand their sponsor s group structure to assist them in negotiating effectively; understand the consequences of the employer debt legislation; put in place contingent asset arrangements; and anticipate and deal with employer insolvency events. Investment Investment of scheme assets is one of the most important trustee duties, whether the scheme is defined benefit or defined contribution. In a defined benefit context, the scheme s investments are a key factor in the funding of the scheme. In a defined contribution context (including money purchase additional voluntary contributions ( AVCs )), investment returns determine the level of benefits members eventually receive. We can help trustees: understand their powers under the trust deed and rules, and the legal obligations and restrictions imposed by law; ensure that the terms of appointment of investment professionals are appropriate; ensure that the correct process is followed when trustees are asked to take investment decisions; 2 Pension Scheme Governance for Trustees Programme
ensure that trustees of defined contribution schemes engage in an appropriate process for selecting and changing investment options, including default options, and for alerting members to the available options on retirement; help put in place a proper investment monitoring procedure; and understand the different types of investment available, including non-traditional investments such as swaps and other derivatives. Advisers Trustees must appoint and monitor scheme advisers and administrators. We can review appointment letters and agreements, identify weaknesses or gaps, and help trustees design a system for monitoring their advisers and administrators. Governance checklist In addition to the above, we offer a governance checklist which sets out the questions which trustees need to consider in relation to scheme governance. Working through these questions allows trustees to identify those areas of scheme governance where they may need to take action. Internal controls workshop We also offer an internal controls workshop based on the Pensions Regulator s internal controls guidance, which introduces trustees to the types of internal controls required. Each workshop is designed on a bespoke basis, focussing on the internal controls and related issues for the scheme in question. TRUSTEE KNOWLEDGE SERIES The foundation of good governance is knowledge. Trustees must understand their legal duties in order to identify the actions they need to take to fulfil their responsibilities. Our trustee knowledge series offers trustees, including chairmen and independent trustees, a series of events, courses and publications to give them the knowledge they need to carry out their duties. EVENTS AND COURSES For details of events and courses being run by the Mayer Brown Pensions Group, please contact Katherine Dixon (kdixon@mayerbrown.com). Foundation Course Our Foundation Course is an entry-level course for new trustees which introduces them to the main issues they need to be aware of as trustees of an occupational pension scheme, and assists them in acquiring the required level of trustee knowledge and understanding ( TKU ). The Foundation Course is run every three to four months to tie in with the six month deadline for meeting the TKU requirement. mayer brown 3
Building Block Classes Our Building Block Classes look in more detail at some of the key areas of pension scheme management. They are designed to be taken by trustees who have already taken our Foundation Course. Typical Building Block Classes topics include: defined contribution pension schemes; defined benefit pension scheme investment; the relationship with the sponsoring employer; and the Pensions Regulator. Annual Pensions Forum Our Annual Pensions Forum takes a look back at some of the key developments over the last 12 months and looks forward to expected developments in the coming year. Bespoke trustee conversance courses Trustees must be conversant with their scheme documentation, including their trust deed and rules and other scheme policies. Like the TKU requirement, new trustees have six months to do this. Our bespoke conversance courses are designed on the basis of a scheme s own trust deed and rules and other policies. We take trustees through their balance of powers, discretions, conflicts policies and procedures, committee structures, terms of reference, recent minutes, recent exercise of discretions and examine their internal controls. Special topic seminars Our special topic seminars are scheduled on an ad hoc basis throughout the year in response to regulatory and legislative developments. TRUSTEE PUBLICATIONS The pensions industry is highly regulated and subject to frequent change. Trustees must follow developments not only in the legislation governing pensions, but also in guidance introduced by the Pensions Regulator and Pensions Ombudsman and court decisions. Our publications keep trustees aware of key developments. Trustee Quarterly Review Our quarterly review provides trustees with a discussion of legal developments over the last three months and is designed to be included with trustee meeting papers. Trustee Guide Our guide is a summary of key issues arising under pensions law including trustees duties and responsibilities, the regulatory framework, funding and investment, transactions, employer debts and moral hazard powers, dispute resolution, liabilities and penalties, winding-up, and related matters. 4 Pension Scheme Governance for Trustees Programme
PENSIONS MANAGER AND SCHEME SECRETARY PROGRAMME We also offer a number of services designed to support pensions managers and scheme secretaries in their roles. For more information please see our Pensions Manager and Scheme Secretary Programme brochure. If you would like to discuss any aspects of our Pension Scheme Governance for Trustees Programme, please get in touch with your usual Mayer Brown contact or: PHILIPPA JAMES Head of Pensions Group Tel: +44 20 3130 3700 pjames@mayerbrown.com BEVERLY COX Of Counsel Pensions Group Tel: +44 20 3130 3676 bcox@mayerbrown.com BETH BROWN Senior Associate Pensions Group Tel: +44 20 3130 3284 bbrown@mayerbrown.com KATHERINE DIXON Professional Support Lawyer Pensions Group Tel: +44 20 3130 3901 kdixon@mayerbrown.com mayer brown 5
About Mayer Brown Mayer Brown is a global legal services organisation advising clients across the Americas, Asia and Europe. Our presence in the world s leading markets enables us to offer clients access to local market knowledge combined with global reach. We are noted for our commitment to client service and our ability to assist clients with their most complex and demanding legal and business challenges worldwide. We serve many of the world s largest companies, including a significant proportion of the Fortune 100, FTSE 100, DAX and Hang Seng Index companies and more than half of the world s largest banks. We provide legal services in areas such as banking and finance; corporate and securities; litigation and dispute resolution; antitrust and competition; US Supreme Court and appellate matters; employment and benefits; environmental; financial services regulatory & enforcement; government and global trade; intellectual property; real estate; tax; restructuring, bankruptcy and insolvency; and wealth management. OFFICE LOCATIONS AMERICAS Charlotte Chicago Houston Los Angeles New York Palo Alto Washington DC ASIA Bangkok Beijing Guangzhou Hanoi Ho Chi Minh City Hong Kong Shanghai Singapore EUROPE Brussels Düsseldorf Frankfurt London Paris TAUIL & CHEQUER ADVOGADOS in association with Mayer Brown LLP São Paulo Rio de Janeiro ALLIANCE LAW FIRM Spain (Ramón y Cajal Abogados) Please visit www.mayerbrown.com for comprehensive contact information for all Mayer Brown offices. Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the Mayer Brown Practices ). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorised and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. Mayer Brown and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions. This publication provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek legal advice before taking any action with respect to the matters discussed herein. 2012. The Mayer Brown Practices. All rights reserved. 0320pen January 2013