Pension funds 'failing to reform'

MOST British pension funds have failed to introduce reforms to corporate governance three years after a key report into the industry, according to a survey by accountants PriceWaterhouseCoopers.

The company's inaugural UK Pension Scheme Governance Study, released today, shows that 65% of respondents had no governance compliance policy in place while 85% said they had no individual governance benchmarks to measure the performance of trustees.

The survey, involving 66 chairmen of major UK pension funds, showed that few have implemented all the recommendations put forward in the 2001 report drawn up for the government by Paul Myners.

Virtually all the funds lag behind in the area of governance ahead of the Pensions Bill, currently before Parliament, which will aim at safeguarding corporate pensions. The Government has also said it could legislate further to force compliance with some recommendations put forward in the Myners Report.

'So much more is being expected of trustees,' said Andrew Evans, chairman of the national pensions audit practice at PwC. 'The positive is that there is the commitment to governance. Where they haven't been that successful is in implementation. The results of our survey suggest that trustee boards are keen to enhance governance but may have lulled themselves into a false sense of security by making some moves to comply with Myners.'

When the Pensions Bill becomes law, it will demand that trustees have a full knowledge and understanding of pensions and investments. However, the survey found that 45% of trustee boards have not reviewed their knowledge and skills. The PwC survey found that, even when reforms had been made, often they had not been formalised or documented, which Evans warned could mean problems for the funds in future.

'It remains to be seen whether simply saying 'we are doing the right thing' will be enough in an evolving environment where the standards required of trustees are constantly increasing,' he said.

The survey suggests a range of action pension funds need to take, starting with the development of a governance policy for the scheme, assessing skills levels and rectifying shortfalls in those skills. PwC also said benchmarks must be established to measure compliance.

The National Association of Pension Funds has said it will set up an online registry of investment professionals who want to serve as pension fund trustees or help pension fund investment committees. 'We want to act as broker to get people in [to pension funds] with investment experience,' an NAPF spokesman said.