Professional pensions trustees: can we do better?

A trustee is a person or company, acting separately from the employer, who holds assets in the trust for the beneficiaries of the scheme. Trustees are responsible for ensuring the pension scheme is run properly and that members benefits are secure.

The Pensions Regulator (TPR)

Pension trustees are entrusted with what can, in effect, be the life savings of millions of individuals.  They must ensure increasingly complex regulatory requirements are met, including a focus on safeguarding their members’ benefits. The decisions trustees make impact the quality of life in retirement of millions of people. It’s a massive responsibility. 

This is set against the backdrop of ever-increasing complexity in the pension sector. Playing acronym bingo we have GMP (including R and E)), ESoG, ORA, ESG, PPF, TPR, TCFD, S179, etc. Then we can look to strategic requirements with journey planning, investment strategy and buyout, and consolidation options that may be on the table. That’s before we turn our heads to the post-pandemic employer covenant discussions, which will likely be further impacted through spiralling inflation.

“So what!?” I hear you ask. Pensions are complex, we all know that! I’ve taken my time to get to the point, but here it is. Quite simply, the quality of pension trusteeship needs to improve. 

Let’s start with the glass half full view. Work has started. In the last few years we’ve seen TPR’s “21^st Century Trustee” initiative. We’ve seen an increase in the professionalisation of trustee boards. OK – let’s get this conflict out on the table now. We are conflicted. But this trend we believe is driven by the realisation that individuals who work 100% in the pensions industry, who can look across schemes and across industry best practice, can help trustee boards make better decisions in the interests of their members. 

Standards need to be higher

Unfortunately, a low bar remains in place for determining who can become a professional trustee; growth of this market should not be at the expense of standards. As of now, you can call yourself a professional trustee without being required to undertake any professional qualifications, or have any financial services experience. Effectively, if you’ve completed TPR’s Trustee Toolkit, and passed some basic tests based on that Toolkit, you can take decisions on billions of pounds of assets and thousands upon thousands of individuals livelihoods.  

Trustees clearly need to act on advice, but regardless of the advice given, trustees are ultimately responsible. So, it is possible for a trustee with little to no qualifications or experience, to take advice from an actuary who has likely spent over four years studying to qualify, and for that trustee to completely ignore the advice. And while the actuary doesn’t generally hold any liability for the outcome, the trustee does.   

I’ve made the industry sound a little like the wild west. But please do relax. We’re fortunate to have many talented and extremely credible professional trustees in the industry. You’ll see this by looking at some of the CVs of those involved. Moreover, TPR has higher powers over those holding themselves out to be professional trustees.   

The introduction of an accreditation process for professional trustees, via the Association of Professional Pension Trustees or the Pensions Management Institute, has also acted to improve standards.  We anticipate, or at least hope, there will be increasingly higher standards expected of those holding a professional trustee accreditation.

We believe that the professionalisation of trusteeship will continue to raise standards. That the standards to which professional trustees hold themselves accountable will continue to rise. That the qualifications and experience required to describe yourself as a professional trustee will continue to rise. That the rise in those standards will serve to improve the likelihood of improved member outcomes. 

In the meantime, trustee boards should ask themselves – do we have the skills necessary to appropriately hold advisers to account? To effectively govern? And remember – the buck stops with the trustee, not the adviser.