Soap box: Charlotte Barbour

Pensions are constantly in the news, whether it�s the debate about their under-funding or the impact of the abolition of advance corporation tax. In a nutshell, commentators have focused on the lack of funds to provide future pensions at the levels promised.

CHARLOTTE BARBOUR

PENSIONS are constantly in the news, whether it's the debate about their under-funding or the impact of the abolition of advance corporation tax. In a nutshell, commentators have focused on the lack of funds to provide future pensions at the levels promised.

It is important, however, not to lose sight of how pension schemes are run, and there is a need to refocus on the stewardship of pension schemes. Most people expect that the scheme they are in will save their money wisely and make sure that their funds grow, but that cannot be taken for granted.

Recent pension legislation has been driven by a policy determination to separate the trustees of pension funds from their sponsoring employers, whilst expecting employers to make good any funding shortfalls. The upshot is that there have been significant changes in recent years to the composition of pension trustee boards. Senior company personnel have been removed from boards with new and potentially less experienced trustees taking over responsibility for funds of all sizes.

Responsibility for a pension scheme has always rested on the trustees but the task may appear more onerous with ever-changing and increasing quantities of rules, a lack of funds to meet the pension's commitments and, if there is a funding issue, there may be increased tensions between the trustees and the sponsoring employer.

The Pensions Regulator has made considerable efforts to provide support for pension trustees with the publication of e-learning tools, codes of practice and guidance of various sorts. For example, last year a Code of Practice was issued on Internal Controls which highlights the key risks that can exist in a pension scheme.

However, this code is designed to support legislation that makes it mandatory for all pension trustees to put in place risk assessment and risk management procedures and processes. In many respects, running an occupational pension scheme is not unlike running a business. Business leaders should be well versed in applying risk assessment and risk management techniques to the businesses they run. Trustees of many large pension schemes have also adapted corporate risk assessment and risk management procedures, and apply these to the operation of their pension schemes, but not all pension scheme trustees have.

The Institute of Chartered Accountants of Scotland believes that this poses a significant risk not only to the pension schemes and their members, but also to the sponsoring employer.

The experience and training of ICAS members in connection with risk assessment and management of business means that they are ideally placed to act as, or assist pension trustees in, this important area. With this in mind, the ICAS pensions working party has constructed some practical guidance to help pension scheme trustees, particularly those who have little experience of risk assessment and risk management.

Each pension scheme has a unique identity, so the guidance takes the form of a series of questions which pension scheme trustees should consider in the day-to-day operation of their pension scheme.

Not all questions will be appropriate to all pension schemes, nor will each question have the same significance for all pension schemes.

However, the questions are designed to tease out the areas where significant operational risks could exist with a view to addressing the management of that risk.

Pension trustees are expected to perform a critical role in the stewardship and management of pension funds, in order to fulfil the pension objectives, which are to pay pensions and benefits. To support this, the ICAS guidance is available, free of charge, and it can be obtained from the ICAS website at www.icas.org.uk.