The Crucial Role of Professional Trusteeship

14th December, 2023

  • Trustees and Tatties

    In my news feed this morning there was a recipe for potato flatbreads, with an opening sentence of “Name a dish that isn’t improved, or unaffected, by the addition of a small potato,” now any Scottish or Irish person will tell you this is not a ground-breaking concept.  Everything is better with a potato and “potato flatbreads” are an age-old staple known as potato “tattie” scones or farls. 

    I will try not to overstretch the analogy, or get all Forrest Gump, but Professional Trusteeship is very much like that potato. The vast majority of trustee boards would be improved by the addition of a Professional Trustee and any exceptions would at the very least be unaffected. 

    Like potatoes, and as identified by a specific group of Scottish and Irish people 20 years ago when Dalriada Trustees was born, there is a spectrum of styles of Professional Trustees, from the co-trustee that helps add body and substance, the chair of trustees bringing extra structure all the way to the central governance solutions of sole trusteeship and beyond. 

    Leaving potatoes aside, what does the right Professional Trustee bring to a board?

    Some reasons are specific to the needs of the board, but the main reasons for appointing a professional trustee include:

    1. Knowledge balance and taking back control

      A professional trustee should bring increased industry knowledge and experience across a number of clients. Helping the board to meet its knowledge & understanding needs and to make sure that the Scheme’s agenda is led by the trustees, ensuring that it gets the right services at the right time and price, using a governance model proportionate to the Scheme’s size, complexity and stage.
    1. Adding diversity

      Appointing a trustee from outside your organisation brings a new way of thinking and helps defend against unconscious bias or group think. A professional trustee firm can also offer access to representatives from diverse backgrounds to help balance the needs of your board. 
    1. Conflict management 

      All trustees are created equal in the law, regardless of how they are appointed or by whom they are nominated. All trustees have the same fiduciary obligation to act in the best interests of the beneficiaries (and potential beneficiaries) of the trust as a holistic group. That is not always easy and can conflict with obligations to the sponsor or your own interest in the scheme. A Professional Trustee should bring independence and experience to assist in managing those natural conflicts. 

    Why would you consider a sole trustee and are there any downsides?

    Outsourcing the trusteeship of your pension scheme to the right firm of professional trustees, with a diverse team of experienced, qualified, professionals can solve a number of issues that schemes experience, especially as they mature   – always remembering that Sole should never mean solo. 

    Filling the gaps within your scheme management model

    Whilst a well governed, diverse board of trustees with member representation and historic knowledge of the Scheme and its interaction with the sponsor is recognised as the best scheme management model, it is not always possible. And, whilst that direct ongoing link to the membership and employer is preferable while the Scheme is open to accrual, or at the very least while most of the members are still employed by the sponsor; it becomes increasingly difficult to achieve and less essential as the legacy nature of the Scheme increases. 

    Independent effective governance  

    A Sole Professional Corporate Trustee brings full independence to the governance of the pension scheme, removing conflict completely. This can be particularly key when Member Nominated Trustees are hard to find. It also frees up the time of key sponsor team members to concentrate on running the organisation. 

    As we know there has been a requirement since January 2019 for all UK pension schemes to operate an Efficient System of Governance, even if we never see the General Code, this is hard coded into statute. A properly resourced professional trustee firm should have its own policies and procedures which will make this simpler to manage, to monitor and demonstrate. 

    Expert guidance through periods of change

    A sole trustee provides an executive management approach which can be more efficient than management by committee, provided that suitable checks and oversight/peer review are in place. This can be especially beneficial during times of corporate change or when managing a scheme through key projects such as risk transfer readiness, transaction, and ultimate wind up.  

    End game alternatives and consolidation options: Is there a trustee model beyond sole?  

    This week I heard the term “operational consolidation solution” for the first time, as I see more firms developing sole trustee plus models. I’ve tried and failed over the years to find a high-level description of Dalriada’s “a better way” solution, and this probably works better than any I have come up with. 

    The key is that the operational functions of a pension scheme are the responsibility of the Trustee(s). In the largest schemes, these have traditionally been provided by in- house teams. If you can merge the best qualities of large in-house teams with those of a quality third party provider; achieving efficiencies and economies of sharing that model across a range of pension schemes; add on key advisers selected from a best-in-class panel; a professional sole trustee team; and (in the case of Dalriada at least) ground breaking IT systems providing real time funding and risk information and online functionality for members; small schemes can benefit from big scheme level governance and service provision and larger schemes can achieve an efficient, risk managed run off solution. 

    Whilst this year’s extraordinarily wet autumn might impact on the quality and variety of spuds available next year, there will still be a professional trustee model to improve the governance and efficiency of your pension scheme, or at the very least not make it worse.  

    Ready to enhance the governance and efficiency of your pension scheme?

    Explore the transformative possibilities of professional trusteeship with Dalriada Trustees. Whether you’re looking to bolster knowledge, introduce diversity, or streamline conflict management, our professional trustee solutions offer a spectrum of styles tailored to your board’s unique needs. Contact us today and optimise your pension scheme for a brighter future.

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    • Published byGreig McGuinness

      Greig is an Accredited Professional Trustee with Dalriada having joined in 2008 from a large organisation specialising in pensions for the not for profit and charity sectors.  Since entering the industry in 1999, Greig has gained a wealth of experience...

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