Small defined contribution (DC) pension schemes have significantly weaker governance arrangements than larger schemes, leaving them less equipped to identify and manage risks to members' savings, according to research by The Pensions Regulator (TPR).
Only 27% of small DC schemes have formal governance arrangements in place, compared with 94% of large DC schemes and 89% of master trusts, highlighting a substantial gap across the pensions market.
The regulator's first survey of trustee governance practices, covering hundreds of trustees across defined benefit (DB) and DC schemes, found that larger schemes and those with professional expertise generally achieved higher governance scores.
Although trustee training is widely established, with mandatory training reported by 90% of DB schemes and 77% of DC schemes, fewer than half of schemes, excluding micro schemes, have a trustee succession plan.
Seven in 10 schemes have benchmarked their governance against TPR's General Code, which sets standards for trustee boards. However, only 29% of boards said improving member outcomes was the primary driver of their decisions, with others balancing this against regulatory compliance and costs.
TPR is urging trustees to review their governance, skills and capabilities as pension scheme decisions become increasingly complex. It said boards should consider their long-term strategic direction, including consolidation where this would benefit members, while strengthening succession planning and risk management.
Richard Knox, TPR executive director of strategy, policy and analysis, said: “The decisions facing trustees are becoming more complex and consequential. That is why the bar on governance standards is rising. Every trustee board should be asking themselves whether they have the skills and experience needed to make good decisions now and in the future.
"We expect all trustees to review their governance against the General Code and keep member outcomes at the centre of their decisions."
The regulator will use the findings as a baseline for monitoring improvements across the market, with further work planned to help trustees assess their skills and understand how effective systems of governance and own risk assessments can improve scheme oversight.












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