Supervisory reviews: Pensions Authority Findings Report

The Pensions Authority (the Authority) has published a Findings Report (the Report) on its 2024 supervisory activities which will be useful reading for pension scheme trustees and their advisors. The Report encompasses the outcome of supervisory reviews of master trusts, defined benefit (DB) and defined contribution (DC) schemes, as well as compliance audit and inspection findings. While there is plenty to digest in the Report, the core of the Authority’s missive is clear. Trustees must prioritise member interests through improved governance, risk management, operations and communications.

Governance: addressing conflicts of interest and board practices

In its assessment of scheme governance, the Authority expressed concern regarding conflicts of interest, particularly in master trusts closely linked to their founder organisations. The Report notes that master trust trustees often failed to recognise the need to include service providers or key function holders from the founder group in their conflicts of interest register. Additionally, it was found that some master trust deeds contain clauses restricting trustees to specific service providers, which the Authority suggests might limit their ability to achieve the best outcomes for members. The Authority expects trustees to seek the removal of such restrictive provisions. While these comments relate primarily to master trusts, they apply equally to stand alone schemes and provide valuable insight into how the Authority looks at conflicts of interest.

The Report notes that trustee board minutes reviewed varied in quality, with some lacking comprehensive documentation of discussions, decisions and actions taken. The Authority urges trustees to ensure that board minutes summarise discussions, decisions and actions with clear timelines for completion. Getting the balance between including enough detail in minutes and too much detail is something trustees might wish to review with their legal advisers.

The Authority reviewed all policies and procedures required by its Code of Practice (the Code) for each master trust. It noted that much of the wording was often copied directly from the Code and that policies should be tailored to the specifics of each scheme. The Report adds that the Authority expects trustees to maintain adequate records of policy reviews.

Operations: enhancing outsourcing oversight and administration quality

The Authority identified issues in contracts with service providers, including a lack of clear recourse for trustees when service levels fall below agreed standards. Where this is the case, the Authority expects trustees to engage with service providers to ensure appropriate indemnifications are in place for their schemes.

Breaches of administration service level agreements were also noted, with failures to provide statutory information to members and issues with pension contributions. Trustees are expected to take meaningful action in response to such breaches and enforce provisions within administration contracts. This finding underscores the importance and legal responsibility of trustees to properly oversee their service providers.

Risk management: strengthening the own-risk assessment process

The Authority's focus on risk management highlighted deficiencies in the own-risk assessment (ORA) process. Risk appetite statements often lacked clarity on whether risks were within tolerance, and trustees did not always provide evidence of their own involvement in the ORA process with the Authority noting that it expects trustees to be responsible for the delivery of the ORA and drawing conclusions.

Many of the ORAs reviewed did not meet the Authority’s expectations and the Report provides that comprehensive ORAs should include wider risk scanning, consideration of outsourcing risks, and analysis of scheme viability and sustainability. It also provides that trustees must ensure that the ORA process is central to their decision-making.

Communications: improving member engagement and transparency

Trustees are expected to have a detailed member engagement policy, yet many policies reviewed were minimal and focused mainly on statutory obligations. Overall, the Authority noted a lack of clarity about trustees' oversight of communications provided by advisors and brokers. The Report adds that trustees must monitor IT platforms used for member communications and ensure ongoing engagement with participating employers. Trustees are also expected to provide clear and comprehensive information to members and ensure timely progression of member complaints.

Investment: clarifying objectives and performance measures

The Authority noted that some schemes reviewed lacked clear investment objectives and performance measures. To remedy this, trustees should ensure that investment documentation includes performance measures and that board minutes reflect sufficient discussion of investment performance. The Report adds that default investment strategies must also be appropriate for members, and trustees should consider rationalising fund choices to ensure consistency in investment strategies and objectives.

Fees and charges: evaluating value for money

Trustees must evaluate the value for money provided by their schemes, including monitoring and benchmarking scheme charges. The Authority encourages participation in the Cost Transparency Standard to enable trustees to better understand and benchmark investment costs. As well as scheme charges, the Report adds that trustees should also monitor other fees and charges applicable to members, including service charges and advisor commissions.

Defined benefit and defined contribution schemes

The Report is heavily focussed on the Authority’s findings on master trust compliance, but it also notes that trustees of standalone DB and DC schemes must ensure they have the capacity to meet the requirements of the Pensions Act (the Act). The Report goes on to say that where this is not possible, trustees should engage with the sponsoring employer to discuss the future of their schemes.

Conclusion: a call to action for trustees

The introduction of the Supervisory Review Process (SRP) has brought about significant development in the Authority's approach to supervision. The findings in the Report will inform the Authority's focus in future years.

It is certain that we will see an increase in the number of schemes selected for the SRP in 2025 and beyond. At the recent Irish Association of Pension Funds Spring Conference, the Pensions Regulator said that the Authority will “triple” its supervisory reviews in 2025, while warning trustees that compliance issues must be addressed urgently.

Only a few trustee boards have been subject to an SRP so far; all trustee boards can expect to be reviewed in time. The Report provides a useful insight for trustees and their advisors into the areas where the Authority has identified governance deficiencies. Trustee boards can prepare for the inevitable day an SRP comes by understanding the statutory framework around SRPs and by reviewing their strategies, processes and reporting processes against the requirements of the Act and the Code and paying particular attention to the common areas of deficiency identified in the Report.

A&L Goodbody has established a dedicated group of Pensions and Regulatory Investigations specialists which can provide expert and pragmatic advice and direction to trustees, pension managers and advisers preparing for an SRP or whose scheme is subject to an SRP. If you would like to find out more information, please contact David Main, partner, Chris Comerford, partner, David Francis, partner or your usual Pensions Disputes & Investigations Group contact.

Date published: 24 April 2025