Pension Fund Governance, Regulations and Best Practices

Pension is an income assured to citizens after retirement as a means of regular income and earning capacity. There are various types of pension schemes or plans across countries, but what is common to any scheme or plan is the need for good governance and regulation. Good pension scheme governance and regulation help identify, manage and control related risks.

Management of pension schemes and plans can be complex and challenging, and hence, having the necessary regulations in place to foster organised administration is extremely important. These regulations revolve around three important aspects of people, processes and structures.

Good governance and regulation is the foundation of any well-run pension scheme or plan. Public sector pension is pension paid to public sector employees. Some of these public sector pension plans are defined benefit pensions while some are unfunded.

Broadly, there are two types of pension plans: defined benefit pension and defined contribution pension. Defined benefit pension means that the amount received on retirement is dependent on the final salary of the employee at the time of retirement from the organisation and length/tenure of employment with the employer, rather than the contribution made towards the pension.

On the other hand, defined contribution pension means that the amount received at retirement depends on how much is contributed towards pension and how well investments have performed.

Direct benefit pensions are further classified as funded, wherein there is a cash value assigned to the pension and this is transferable to another provider, and unfunded, wherein the transfer is not possible because the plan uses the employer’s current income to pay pension rather than setting aside assets.

Pension regulation broadly refers to the set of standards, laws and rules governing pension and pension pay-out to the deserved recipients. Pension regulation is needed to provide standards that positively impact market efficiency, consistency, transparency and accountability across the pension department of the public sector.

It is a key driver for effective risk management of pension funds. Nations adopt different initiatives and set-up different plans and fund systems to protect public pension recipients in case their public sector organisations face financial difficulties; one such initiative is the Pension Protection Fund.

While good governance is ideal and preferred by all organisations offering pension benefits to their employees, challenges of corruption, conflict of interest, misrepresentation of requirements, poor fund management, the involvement of agencies, etc. pose a threat to the safety and success of pension schemes and plans.

This Peganix training course will empower you with complete knowledge and information about pension as well as its governance and regulation. Undertaking this course will not only help you understand pension schemes and plans better but also assist you in devising the appropriate and most suitable schemes and plans for your organisation.

Further, the detailed modules in this course will build your capabilities to analyse the pension process, identify risks and prevent these through immediate and necessary steps needed at an organisational level.

By undergoing this Certificate in Pension Fund Governance, Regulations and Best Practices course, you will gain a broader perspective to pension and pension governance and regulation, and will thus be more capable and confident of driving changes for the betterment of pension schemes and plans.

In doing so, you will demonstrate your skill and capabilities to undertake more challenging and higher roles and responsibilities within your organisation and beyond, supporting faster career growth and progression.

The knowledge gained through this course will also improve your awareness and understanding of pension plans for you and will be critical for financial planning post-retirement.

Course Objectives:

The main objective of this Certificate in Pension Fund Governance, Regulations and Best Practices course is to empower public sector professionals with—

• Thorough understanding of pension, pension schemes and plans as well as pension governance and regulation.
• The required knowledge and information to oversee and manage the pension plans in the organisation.
• Adequate skill and confidence to work with advanced techniques and strategies to enhance pension management through better governance and regulation.
• Adequate perspective and awareness to predict challenges and risks related to effective pension governance and the necessary ability to work towards eliminating these completely.
• The required information, experience, exposure and confidence to examine and enhance current pension schemes or devise new schemes for the benefit of employees.
• Information and knowledge to ensure that the organisation’s plans comply with universally acceptable standards.
• The required capabilities to undertake more challenging and senior roles in pension management, governance and regulation.

Training Methodology

At Peganix, training is delivered in different formats and is designed based on the course topic and the training audience. The course topic is divided into well-defined and strategically decided modules that cover all important aspects in detail and in a logical flow for greater retention.

In addition to the usual classroom sessions and trainer-delivered presentations, the training method encourages trainee participation through group activities, projects, discussions, debates, etc. Relevant case studies are also discussed to ease the relatability of the course topic in the professional environment.

Further, the current schemes and plans in one’s organisation are discussed to understand problems, identify best practices and make relevant changes or suggestions for the overall benefit of the organisation and employees.

The above unconventional method of training is as per Peganix’ Do­–Review–Learn–Apply Model.

Organisational Benefits

With public sector professionals attending the Pension Fund Governance, Regulations and Best Practices course, their organisations will benefit in the following ways:

• A more aware, well-informed, equipped, knowledgeable workforce to oversee pension governance and regulation
• More innovation and suggestions for changes and enhancements with regard to pension schemes and plans as well as governance and regulations
• Better managed and regulated pension schemes and plans
• Reduced risks of bankruptcy or other similar shortcomings because of early identification of such possibilities in time and implementation of the necessary next steps
• Greater protection against corruption and bribery because of increased transparency and accountability by more involvement of employees and better regulation processes and mechanisms
• Compliance of pension plans and schemes to universally acceptable standards
• Greater satisfaction of current employees and pension recipients
• Competitive advantage as an employer because of updated and upgraded pension policies and plans

Personal Benefits

By undertaking this Certificate in Pension Fund Governance, Regulations and Best Practices course, public sector professionals will benefit in the following ways:

• Increased understanding and knowledge of pension plans and pension governance and regulation
• Greater ability and expertise to closely review existing pension schemes of one’s organisation, identify gaps and correct them
• More awareness of universal standards and policies related to pension and replication of these in one’s organisation to ensure compliance and adherence
• Increased skills and knowledge to suggest changes to existing plans from the viewpoint of enhancement or devise new plans for the benefit of employees
• Greater abilities and confidence to handle change related to pension and pension policies in the organisation
• Increased confidence and broadened perspective to foresee and pre-empt challenges and risks to effective pension governance and regulation and address these well in time
• Increased capability and confidence to play a pivotal role in pension scheme management, governance and regulation in one’s organisation, thus demonstrating one’s talent, skill and preparedness to undertake additional roles and responsibilities for career growth and progression
• A sense of pride and satisfaction in helping one’s organisation assume competitive advantage as an employer and in devising the best plans and policies for the benefit of employees

Who Should Attend?

• Senior members and top management of public sector organisations responsible for strategizing and devising plans around pension for employees
• Investors and shareholders to understand the kind of investment and the possible risks to investment when considering pension schemes
• Agencies or scheme managers whose sole responsibility is to ensure accurate pension accrual and pay-out
• Human Resource professionals who play an important part in ensuring employee satisfaction and engagement through various current and future benefits in the organisation
• Policymakers responsible for devising policies and plans around pension for employees, balancing the interest of the organisation and employees and compliance with universal standards
• Professional advisors who review pension plans of organisations and make suggestions for enhancement
• Any other public sector employee who would like to know more about pension governance and regulation and who would want to play an important role in driving effective pension governance and regulation in the organisation

The Certificate in Pension Fund Governance, Regulations and Best Practices course will cover the following areas important for effective pension governance and regulation:

Day One

Overview of Pension, Pension Governance and Pension Regulation

• Definition of pension
• Importance of pension governance
• Importance of pension regulation
• Types of pensions
  • Defined benefit pension
  • Defined contribution pension

Factors Determining Defined Benefit Pension

• Final salary at retirement
• Tenure of employment with the employer
• Accrual rate

Factors Determining Defined Contribution Pension

• Money paid by the employee into a pension
• Money paid by an employer into a pension
• Tax relief received by the employee
• Performance of employee investments

Benefits of Saving into Pension

• Employer contribution
• Tax relief
• No inheritance tax
• Diversified, well-managed investment portfolio

Possible Recipients of Public Pension Schemes

• Civil servants
• The judiciary
• Local government workers
• Teachers
• Health service workers
• Fire and rescue workers
• Members of the police forces
• Members of the armed forces

Potential Risks to Pension Funds

• Financial crises
• Dishonest employer and pension managers
• Lack of financial literacy of employees

Objectives of Pension Fund Regulation

• Rule and standard creation to protect against theft
• Ethical standard creation for pension managers
• Supervision of performance and activities of pension managers
• Penalty issuance on offence or non-adherence to rules
• Representation of the voice of individual workers to ensure pension security

Focus Areas for Regulation in Case of Pension Management by Agencies

• Risk aversion
• Outcome uncertainty
• Goal conflict
• Task programmability
• Outcome measurability
• Length/tenure of agent–organisation association

Stakeholders of Public Pension Funds

• Plan participants
  • active members/current contributors
  • retired member/current recipients
  • survivors and dependents of active and retired members
• Government
• Taxpayers

Board-Related Focus Areas in Pension Governance and Regulation

• Board composition
• Nomination and termination
• Accountability
• Performance measurement
• Definition of roles and responsibilities
• Standards of behaviour
• Information management and transparency

Benefits of Good Pension Governance and Regulation

• High pension fund performance, low stakeholder cost
• Lowered overregulation costs
• Appropriate and effective supervision by authorities
• Positive effects on economic efficiency

Challenges in Pension Governance and Regulation

• Corruption and misconduct
• Lack of expertise of the governing body
• Agency issues
• Uncertain population dynamics
• Lack of required resources and skill
• Conflicts of interest
• Lack of incentives for fund managers
• Board member issues
  • Lack of discipline
  • Lack of skill and expertise
  • Unclear, undefined responsibilities
  • Incorrect member selection