Trust-Based Pension Schemes: Trustees and Governance; Building a Stronger Future

Dalriada has issued its response to the DWP’s consultation “Trust-Based Pension Schemes: Trustees and Governance; Building a Stronger Future”.

The professional trusteeship market has changed markedly since the pandemic. The material changes to the pensions landscape anticipated in the coming years, including the introduction of regulations governing the distribution of defined benefit scheme surplus and market consolidation mean that the skills required by effective trustee boards in the 2030s will be significantly evolved from those required today.

We believe the Trusteeship market is broadly working effectively. Trusteeship standards are far higher than they were a decade ago – not least because of increasing number of properly resourced and experienced professional trustees, with robust business infrastructures supporting those services. It is right for DWP to consider the effectiveness of the trusteeship market to raise the governance bar and consider closer alignment to the types of standards and levels of professionalism expected of others engaged with delivery of services on pension schemes. Evolution rather than revolution is required.

Key themes to our response:

1. There should be a higher bar for the accreditation of independent professional trustees – to ensure the highest standards of trusteeship are transparently procured. The current accreditation test does not suitably equip an individual for dealing with highly complex situations.
2. The definition of a professional trustee should be changed – it should not merely be someone who is marketing their services to multiple schemes – rather someone who is able to evidence the full range of skills required, or has the support to help deliver a wider skillset.
3. It should be made easier for lay trustees to be paid – thereby increasing the standards of lay trusteeship and leading to greater diversity. It should not be the case that the only lay trustees that can be found are either current employees or those with sufficient free time. We believe reasonable remuneration will help to raise standards without making people quasi-professional.
4. The procurement of professional trusteeship should be transparent to manage conflicts of interest. Currently an adviser to a trustee board can manage a non-public procurement process for an independent trustee, with that independent then subsequently controlling that advisers’ budget.
5. There should be enforced standards for the transfer of administration services between providers – removing barriers to switching providers thereby driving efficiency in the market. The standards should cover what data should be provided, the timescales within which it should be provided, and the cost of that provision.

Adrian Kennett – Managing Director at Dalriada Trustees says:

“Independent Trustees are currently involved in the management over £1 trillion of UK pension scheme assets for over 40 million members. As the pensions market develops, trustees need the skills and experience to stay one step ahead. The pensions industry also continues to develop with increasing market concentration, new solutions as well as increased regulations. We welcome DWP’s active engagement and consultation on the effectiveness and efficiency of scheme governance. To ensure we continue to effectively protect beneficiaries, the qualification and experience requirements of trustees need to be improved. Lay trustees also need to be supported – diversity could be achieved by making it easier to reasonably remunerate lay trustees.