A sole trusteeship is when a full trustee board is replaced with a single entity, either an individual or a professional trustee company.
Dalriada is one of the leading providers of sole trusteeship for UK pension schemes.
Sole trusteeship appointments are an increasing trend in the pensions industry. The criminal and civil penalties incorporated in the Pension Schemes Act 2021 are making non-professional trustees more hesitant or even reluctant to continue to take on the role of a trustee. In addition, the savings that can be made by appointing a sole professional trustee can greatly mitigate the costs of the appointment, e.g. removing the need to appoint Member Nominated Trustees, trustee training requirements and records.
Nearly 60% of all our trusteeship appointments are on a sole trustee basis, which we believe is the highest proportion of any of the major firms of professional trustees in the UK and demonstrates our experience in delivering an effective sole trustee solution.
Each sole professional trusteeship appointment is unique
In our view each sole professional trusteeship appointment is unique, reflecting the circumstances of the particular scheme and sponsoring employer.
When we are appointed as a sole professional trustee our clients get the whole company, with our combined experience and expertise, not just one person, but at the same cost as appointing an individual as a professional trustee. While in practice we normally put forward two named professional trustees to every appointment, in reality we provide a complete team of experienced pension professionals. The composition of the team will reflect the bespoke requirements of each scheme and the balance of skills, knowledge and experience required.
For Dalriada, sole trusteeship is a team effort
Our trustee team is made up of actuaries, administrators, lawyers, investment specialists, covenant specialists, accountants, pension managers, governance specialists, end-game and buy-out specialists. Together with a range of other pension professionals, this expertise ensures we can always call upon the right skill set for your scheme.
We work with the sponsoring employer in a strategic, pragmatic and collaborative way to fulfil our duties as a trustee whilst ensuring there are no unexpected surprises. In our role, we will work closely with the scheme’s service providers and advisers to make sure they focus on adding value for the scheme and its members, whilst ensuring that legislative and regulatory requirements are complied with. We invite the sponsoring employer and other stakeholders to our formal trustee meetings so that they can see the work we do as a minimum.
However, potentially the ideal model is the appointment of a sole professional trustee, supported by a Pensions Committee, consisting of the members of the previous trustee board. With this model you have all of the benefits of the sole professional trustee, which takes on all of the legal and regulatory responsibilities, combined with the historical knowledge and experience of the previous trustee board.
As a sole professional trustee, Dalriada will take on the legislative and regulatory requirements for running the scheme, freeing-up time for the senior management team. Having us act as sole professional trustee also helps manage the conflicts of interest which can arise from time to time for trustee boards and our independence means that the outcomes achieved reflect a balanced outcome for the scheme and its members, but also the sponsoring employer.
Advantages of appointing a sole professional trustee
Do not confuse sole with solo. Sole trusteeship is a team game. To work effectively, the sole professional trustee should be represented by a minimum of two experienced professionals to ensure diversity of skills, experience, and perspective in decision making and good governance. Issues are discussed by the sole professional trustee team, with appropriate peer review processes in place, along with effective internal controls.
Sole trusteeship means sponsors are delegating, not abdicating, responsibility. Ongoing engagement at a senior level between the sponsor and sole professional trustee is vital to make the arrangement work effectively.
Code of Practice for Professional Corporate Sole Trustees (PCST)
Recognising the growing demand for sole professional trustees, a new Code of Practice for PCSTs, effective 1 January 2021, has been published by the Association of Professional Pension Trustees (APPT). Where a sponsoring employer is thinking about appointing a PCST, it should ensure that the prospective PCST can evidence robust processes are in place for adhering to the requirements of the Code of Practice.
So what does a sole trustee look like?
The key benefits of appointing a sole professional trustee:
Significant Time Savings
Trustees operate within a highly regulated environment and require both a substantial amount of direct time engaged in their duties and in mandatory training and development.
Sole trusteeship materially reduces the number of sponsor staff involved in the scheme’s fiduciary activities, while ensuring the sponsor continues to be fully engaged with the management of the pension liabilities.
−Freeing up your staff and their time to concentrate on your business
− Ensuring you remain engaged in the scheme’s management
Dynamic Scheme Management
A sole trustee can act far more quickly than the traditional full trustee board, where protracted debates can delay decision making.
This is particularly beneficial when responding swiftly to changing investment market conditions, being able to challenge advisers and make decisions without the need to call full trustee board meetings.
A sole trustee also avoids any need to establish sub-committees, with the associated additional governance requirements, terms of reference etc.
− Faster response times
− Tactical agility for time-sensitive decisions
− Sponsor works only with the sole trustee, which can help make quicker decisions
A sole trustee streamlines the communication and decision-making process and improves consistency of the approach.
Using professional expertise, the sole trustee will implement effective governance controls, so the scheme can achieve its objectives in an efficient and cost-effective manner.
Appointing a sole trustee removes the need for the employer to be involved in the day-to-day running of the scheme. Regular communication and reporting are established so the sponsor continues to have accurate and current information and full visibility of the scheme’s activities and strategies.
− Streamlining stewardship
− Efficiency and cost-effectiveness
− Sponsor retains transparency and control
Removing Conflicts of Interest
Trustees must act in the best interests of the scheme’s beneficiaries; the corporate responsibilities of senior managers and directors when acting as a trustee can often cause significant conflicts of interest.
Additional challenges can arise where the affiliate trustees are directors of a trustee company: Section 175 of the Companies Act 2006 covers the duty to avoid a conflict of interest, and states that “a director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company”. The appointment of a professional sole trustee removes this issue.
− No conflicts of interest with members
− Removes Companies Act 2006 requirements of Trustee Directors
− Achieves fair solutions
Improved scheme governance
The ever increasing legislative, regulatory, tax, legal and investment requirements and complexities means senior managers and directors on trustee boards can struggle to deliver appropriate governance while running the sponsoring company.
Covid-19 has resulted in a rapid increase in digital solutions by the pensions industry while implementing business continuity plans. The adoption of video conferencing, electronic verification and data transfer increases the risks of cyber security and data protection.
IORP II (transposed into UK legislation by SI1103 in January 2019) requires evidence-based governance, where trustees need to document the effectiveness of their governance framework, including internal evaluations and own risk assessments.
The appointment of a sole trustee allows business leaders to concentrate on running their business, while the professional trustee runs the pension scheme.
− Delegate data protection risks
− Delegate cyber security risks
− Effective Business Continuity Plans
− Effective governance framework
− Future proof
Value for money
A professional sole trustee can more easily manage the advisers to adhere to agreed fixed fees / budgets, with cost and service comparators readily to hand.
They will also work quickly to get actions completed, which in itself also helps to manage the adviser spend.
− Cost control, although minimum cost is not always value for money
− Cost comparison and experience of service provision
Trustee Knowledge and Understanding
With a professional trustee appointed as a sole trustee, member-nominated trustees (MNTs) and employer-nominated trustees (ENTs) are no longer required, along with the associated requirements of Trustee Knowledge and Understanding etc.
However, this does not prohibit a sponsor from establishing a ‘Pensions Governance Committee’ to work with the sole trustee, which can be particularly advantageous with legacy details, culture, member communication and member perception; particularly where there are active members and/or deferred employees and/or union representation.
− Better able to meet the increasing technical knowledge requirements
− Mitigate loss of historic scheme knowledge and assist with knowledge of the sponsor and culture of the business
- Attend and participate in trustee meetings.
- Work collaboratively with existing trustees and sponsoring employers.
- Provide unique innovative approaches to the challenges schemes face.
- Monitor the scheme's investment strategy and performance.
- Provide strategic direction.
Chair of trustees
- Provide input and prepare agenda for trustee meetings.
- Attend and chair trustee meetings.
- Review and approve the minutes of the meeting.
- Monitor actions arising and feed back on progress.
- Also a strong, experienced and knowledgeable independent trustee.
- Experienced team working behind each sole trustee.
- Single point of contact.
- Work closely with the scheme’s service providers and advisors.
- Reduces need for sponsoring employer monitoring.
- Invite employer and stakeholders to attend formal trustee meetings.
- Maintains high quality professional services.
- Strategic direction and full control.
- Single point of contact.
- Saves scheme time and money.
- Access to our ground breaking technology, Mantle®.
- Live administration and actuarial data.
Experienced team working behind each sole trustee.
Single point of contact.
Work closely with the scheme’s service providers and advisors.
Reduces need for sponsoring employer monitoring.
Invite employer and stakeholders to attend formal trustee meetings.