Occupational pension scheme governance
2 May 2019
EU Directive 2016/2341 (commonly known as “IORP II”) became European Union law at the beginning of 2017 with a requirement for the UK Government to implement it into UK law by 13 January 2019. It sets common standards for ensuring the soundness of occupational pensions and better protects pension scheme members and beneficiaries. The EU Directive also requires occupational pension schemes to have an internal audit function.
IORP II added 43 new articles to the original IORP directive, putting a renewed focus on governance, risk management and communication. In support of this the ICAEW published their paper in March 2019 called - Occupational Pension Scheme Governance – Assurance about Internal Controls. This addresses occupational pension schemes that are set up under trust, governed by a board of trustees and regulated by the Pensions Regulator.
The ICAEW paper describes how independent audit assurance can play a part in the governance of UK pension arrangements and identify seven key questions to help assess trustee assurance arrangements.
As you would expect and in line with IIA Standards the paper says that when selecting a suitable internal audit candidate that consideration should be given to:
- Conflicts of interest
- Knowledge of the subject matter
- Professional experience in auditing and reporting techniques
In formalising the internal audit role within the scheme, the ICAEW recognises the need for an Internal Audit Charter to be agreed between the trustees and internal audit that includes reporting lines, authorising access to records, personnel and physical properties relevant to the performance of engagements along with providing:
- A description of the services provided
- The nature of the services it will provide
- Emphasis required of internal audit to help the scheme achieve its objectives
In addition, the paper acknowledges that Trustees may be in receipt of several independent assurance reports, the need for Assurance Mapping and the use of the Three Lines of Defence to help identify, and understand, the different contributions the various sources can provide.
Overall, recognising and embracing the mandatory elements of the IPPF!