Eight Strategies for Effective Pension Trusteeship

23rd November, 2023

  • Navigating Change, Challenging Advisers, and Securing Member Benefits

    Pensions Trustees play a crucial role in manging the security of members’ benefits, maintaining a relationship with the scheme sponsor and co-ordinating expert advice when needed. In recent times, mergers and acquisitions have changed the landscape of actuarial, legal and administration firms and the teams that provide effective pension trusteeship advice to Trustees. We have also seen endless changes to legislation and regulation. 

    Against this ever-changing backdrop, how can Trustees effectively challenge advisers and ensure we reach the right conclusions? 

    8 Key Strategies to Ensure Effective Pension Trusteeship

    The ability to do this effectively requires a combination of skills, knowledge, and a careful approach to ensure the best outcome for our members, while maintaining the support of the sponsor. The key strategies that can deliver this are: 

    1. Lead, don’t follow

      Trustees should set the strategic direction for their scheme, working in collaboration with the sponsor. This will include clear objectives and a framework for managing the scheme towards these objectives. The adviser’s role is then to support the trustees and to be proactive with ideas on how to move the scheme in the right direction. 
    1. Diversity of advice

      This can be a challenge for lay trustees who only act on a single scheme because they only ever see one view of the world. This can be mitigated by attending seminars and events to hear from a range of different advisers or if there is an independent trustee on the board who sits across multiple schemes, leveraging their wider experience, thereby enabling the Trustees to be more challenging of their advisers. 
    1. Be curious

      Ask questions to improve your knowledge or clarify any uncertainties so that you (and the wider board) understand the facts underpinning the advice. Challenge the use of acronyms, they are common place in pensions and can make simple concepts unnecessarily complex. Even if you think you know, there may be others on the trustee board who are less confident about asking questions so ask the question anyway – you may end up helping a colleague. 
    1. Education and learning

      The best platform from which to challenge advisers is one where you have a good understanding of the topic. Therefore, a good Trustee never stops learning. The first step is clearly to meet TKU requirements but Trustees should then identify other areas where they would benefit from education in the form of CPD and updates on topical issues. This doesn’t mean sitting in a trustee training session for a day – there are so many online webinars and articles now that you can keep your knowledge up to date in bite size chunks. 
    1. Challenge

      Don’t do this for the sake of it, but if something isn’t clear or seems out of line with what you are expecting, ask why. This will make it a more satisfying relationship for both the Trustee board and the adviser, who should relish the opportunity to expand on their advice and help the Trustees to come to the right conclusion (which may not be the same as their initial advice suggests…).
    1. Setting expectations

      It is important up-front to set expectations for advisers in terms of the proactivity required and the areas where the trustees are looking for added value. These should be documented and agreed between the Trustees and their advisory team. 
    1. Review and feed-back

      Without telling advisers how they are doing against the expectations you have set, they won’t have the chance to respond and adapt. There is already an objective review process in place for investment consultants but it is worth considering extending this to other key scheme advisers. 
    1. Second opinions

      For significant decisions, consider a second opinion if you truly aren’t comfortable with the advice you are getting. This works best on specific projects, for example GMP Equalisation or complex issues with scheme rules, but for larger schemes it can be helpful to have an ongoing retainer with a different advisory firm.

    Striking the balance

    The key in all of this is to strike a balance between trusting the expertise of advisers and challenging the advice in areas where it is not clear or the Trustees’ knowledge isn’t as strong as it should be. This will result in better decisions and, ultimately, maximising the chance of paying members’ benefits in full.

    Ready to elevate your pension trusteeship and ensure the best outcomes for your members?

    Speak to us today to explore how our expert guidance and tailored solutions can empower your trustee board. For more information or to schedule a call, contact us or reach out to Charles Ward. Take the proactive step towards effective trusteeship – let’s shape a secure future for your pension scheme together.

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    • Published byCharles Ward

      Charles is an Accredited Professional Trustee focused on the Midlands and North West of England. He currently acts as the lead Dalriada trustee to a portfolio of sole, co- and Chair of Trustee appointments ranging in size from under £5m to...

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