Professional Trustee support and the Sole Trustee
2nd June, 2021
The Institute and Faculty of Actuaries (IFoA) reported back in January 2021 that regulatory changes had strengthened the governance of trust-based pension arrangements and recommended that schemes consider employing a higher percentage of professional trustees. Since then things have moved on, with the Pensions Schemes Act 2021 set to introduce new criminal and civil sanctions that affect trustees and employers. In addition, the race to be a net zero hero continues to heat up (apologies for the pun), support for the war against scammers (thieves – we should call them what they are) continues to improve and The Pensions Regulator has issued the consultation on its Super Code (‘one Code to rule them all’!).
Importantly, the Super Code increases the governance requirements of trust-based pension arrangements yet further. The chicken and egg question can now rest easy for a while. The question now is which comes first, the ORA (Own Risk Assessment) or the ESOG (Effective System of Governance)? In all events, the pension industry can celebrate another two acronyms destined to become common usage.
Actually, the more important question now is how do employers and trustees assess the skill set of their Trustee Board, so that they can confidently operate an ESOG?
If the Trustee Board cannot evidence its own effectiveness, how can it evidence an ESOG? It also follows that if the Board is unable to evidence an ESOG, how can the ORA be accepted as an adequate assessment?
Professional Trustee support is available and is needed more than ever. Importantly, it can be provided in many ways: as Chair, Co-Trustee, Scheme Secretarial, Pensions Manager, Governance and Governance effectiveness assessments. There is also a growing demand for professional trustees as sole trustees.
Advantages of appointing a sole trustee
A sole trustee takes on all of the work and legal responsibility, which was previously the remit of the whole Trustee Board and provides many cost savings. For example, with a sole professional trustee there is no requirement for Member Nominated Trustees (MNTs) and the time, cost and effort needed to develop the skills, knowledge and experience of lay trustees are removed.
The sole professional trustee provides significant time savings, dynamic scheme management, streamlined processes, with minimal conflicts of interest and decision biases, improved scheme governance and value for members.
To ensure a continuing link between a pensions scheme and its members, it can also be very advantageous for the previous Trustee Board (which would have included employer and member nominated trustees) to establish a Pensions Committee to support the sole professional trustee. All of the previous experiences and scheme knowledge then continue to add value for members – vitally important to evidence the ESOG.
Do not, however, confuse sole with solo. Sole trusteeship is a team game, ensuring diversity of skills, experience, and perspective in decision making and good governance, all of which are also essential to evidence the ESOG.
So what does a sole trustee look like?
View on YouTube – https://youtu.be/TRqvNc5OHg8