Accreditation and Covid-19
What four lessons have pension trustees learned working in a Covid-19 world?
Firstly, congratulations to our very own Michael Clark who became the first PMI Accredited Professional Trustee on 23 April 2020. Whilst it’s a personal privilege, more importantly it shows the pensions industry is serious in meeting The Pension Regulator’s often stated ambition to raise the standard of trusteeship. As pension funds become increasingly complex and look more like a subsidiary business of the sponsor, all trustees need to ensure that they have the necessary training and aptitude to undertake the role.
Back to the topic What four lessons have pension trustees learned working in a Covid-19 world?
This is based on our own experience to date together with virtual coffees with other trustees and advisers.
1. Technology is crucial
How many trustees and advisers had used virtual meeting technology before the lockdown? Now, if there was ever any doubt, broadband is the fourth utility. We have held meetings on different virtual meeting platforms, Microsoft Teams, Skype, Webex, JoinMe and our personal favourite Zoom. Whilst many of us have held meetings by conference call we don’t believe that, given the choice, many would opt to go back to this. For a cracking example have a look here We did recently have to do a meeting via conference call, I think we can call agree they are not fun.
That’s not to say that video calls are perfect, currently they are not. All parties have had to get up to speed in using the technology and there are issues for Chair’s in ensuring engagement but it is a learning experience which will see improvements. However, not engaging with technology is not an option for a 21st Century trustee.
2. Scheme governance
Linking into the technology point is the length of trustee meetings. If anyone has had to do a 10am-4pm trustee meeting, using video, will agree that they can be difficult.
Our experience is that meetings have to be shorter. Some items dealt with in Committees and then reported back for a final decision if the Committee has not been given delegated decision-making powers. An alternative we have seen is more meetings taking place in order to get through the trustee business.
One thing that Covid-19 has taught us is that trustee business only increases in times of crisis. Some projects, such as potential buy-in’s or liability management exercises, may be put on hold but they are replaced by items such as understanding how the administrators are continuing to pay pensions and ensure that there is sufficient cash available to pay member benefits. Whilst we are here, a round of applause to administrators who have risen to the challenge of home working yet continuing to pay members benefits at the right time.
Trustee boards still using paper packs have struggled to get meeting papers out because of issues of collating, printing and delays in the postal service. Web based meeting tools such as PensionPal, E-share and Knowa have fared much better as hard-pressed scheme secretaries have been able to arrange meeting papers pretty much as usual.
3. Sponsor covenant
If there was any doubt that the pension scheme trustees need to understand their sponsor covenant inside out and back to front we hope these doubts have gone. Whilst some high street sponsors have, and continue to suffer, some companies have seen an uptick in business. Companies focussing on hard hit sectors, entertainment, eating out and sport are finding life tough. Some may have requested a Deficit Reduction Contributions and TPR has provided some guidance to trustees facing requests from sponsors to do just this. We suspect that TPR’s guidance on this may be enhanced as time goes on. Whilst there is an immediate crisis we are equally concerned for how sponsors businesses will cope in a post Covid-19 world. Whether any future recession is U or W or V shaped and how the business plans to deal with this is has to be fully thought through by the trustees. As we have said before here Integrated Risk Management hinges on the sponsor covenant. A collaborative approach between sponsor and trustees is even more essential now.
4. The importance of an effective chair
TPR is on record to say that an effective chair of trustees is critical to ensuring that the trustee board works effectively. In our experience this is critical as they set the tone for how the trustees will interact with their advisers, the scheme sponsor and themselves. The difference between an effective and ineffective chair is tangible. The importance of making the right appointment cannot be overstated.
There are more lessons for us to learn as we deal with the immediate and future impacts of Covid-19. We will be picking these up in future blogs.
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