An exploration of the governance and accountability of UK defined benefit pension schemes
In recent years, the financial status of pension schemes has attracted a great deal of attention from the national press and policy makers. Despite the resulting increase in regulation, many authors maintain that the governance of UK pension schemes remains opaque. This thesis analyses the accountability relationships that are evident in the governance mechanisms of UK pension schemes and investigates how accountability is discharged therein. It finds that trustees are central to the governance of UK pension schemes and that the following stakeholders are accountable to the trustees: (i) sub-committees to the trustee board; (ii) the fund manager; and (iii) the actuary. The evidence suggests that accountability is fully discharged in these relationships. Conversely, trustees are accountable to (i) the auditor; (ii) the PR; (iii) the sponsoring employer; and (iv) the members/beneficiaries of the pension scheme. The evidence suggests that a variety of documents are used to discharge the trustees’ accountability including: (i) the annual report of the pension scheme; (ii) the annual report of the sponsoring employer; (iii) the Statement of Investment Principles; (iv) the Summary Funding Statement; (v) the Popular Report; (vi) and other pension scheme media such as pension scheme booklets, the pension scheme web-site and annual benefit statements. In doing so, the evidence suggests that, in terms of Stewart’s (1984) model, accountability for probity and legality, process, performance and policy accountability is discharged. The evidence also suggests that, with the exception of the pension scheme members/beneficiaries, the trustees are held to account in all of their accountability relationships. The main finding of this thesis is that pension scheme members/beneficiaries fail to engage in the governance processes of the pension schemes on which they rely so much; if they wish to preserve their future pension benefits, they will need to find a voice.
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