Increased scrutiny of pension scheme governance has seen 70 per cent of pension trustee boards making enhancements to their governance over the past year, according to a new study by PricewaterhouseCoopers.
But PWC also found that 54 per cent of trustee boards do not use a formal governance policy as a framework for decision making.
Andrew Evans, chairman of PWC's national pensions audit practice, said: 'Our 2006 study shows that governance is rightly high on the agenda of trustees. With just under three-quarters of boards responding that they were well aware of the importance of good governance, it demonstrates the concrete steps that they have been taking over the last two years to improve governance.
'The results of our 2006 survey are encouraging but there is still some way to go and effective governance of UK pension schemes will be a continually evolving process.'
Pension scheme boards are also grappling with the implications of Pensions Act 2004 which has changed occupational pension provision in the UK and has magnified the onus on trustees.
Under the Act, trustees will be required to have appropriate knowledge and understanding of the law governing their scheme, of the funding of schemes and of the investment of scheme assets. Trustees also need to understand their employers' financial position and their ability to continue to fund the scheme in order to protect scheme members' interests.
The 2006 report is PWC's second study on pension scheme governance: 81 chairmen of large pension schemes took part in the in-depth survey to gain insights into key trends and issues facing trustees. Forty-five percent of survey respondents chaired schemes with over £1 billion of assets.
The report also highlighted that one of the most challenging area for today's trustees is managing conflicts of interest.
Although 61 per cent of trustee boards have established a process for managing conflicts of interest, obligations such as sharing all relevant available information are not always fulfilled.
The study's authors were very surprised to find, given the recent emphasis on risk, that 18 per cent of trustees are not yet managing the whole spectrum of risks faced by the scheme.
Mr Evans added: 'We are at a critical stage in effective pension scheme governance. Recent changes in regulation such as the Pensions Act 2004 have increased the powers of trustees and hence the responsibility upon them. It is imperative that trustees are both well aware of the changes and position themselves to respond to these new challenges.'
