How effective are the pension scheme trustees?
This is a question which trustees themselves and the sponsors of the pension schemes that they pay for should be asking on a regular basis.
There has been a lot written about this. Indeed some from ourselves
– https://www.cbcpensionservices.co.uk/good-pension-trustee/ –
and certainly The Pensions Regulator, who, in many ways, since the introduction of its 21st century Trusteeship campaign in 2016,
– https://www.thepensionsregulator.gov.uk/en/trustees/21st-century-trusteeship –
has been instrumental in raising the standards of governance and to improve the way in which pensions trustees manage their pension schemes.
At a time when the risks to pensions have never been clearer, (including the increasing work for little benefit which is GMP equalisation), ensuring that:
- members retain trust in pensions and
- the sponsors who support schemes are able to get through both Covid 19 and the recession which will surely follow
means pension trustees need to be effective and focused on the right questions.
The big question is how to do this?
Role of the Chair
There is no doubt the Chair is a critical player in making the trustees an effective body with a clear strategy and focus. This is particularly so in the video conferencing world in which we currently live and show every sign of continuing in for a while to come. We’ve written about this before here
The Pensions Regulator is also pretty clear about the importance of an effective trustee chair.
Among other attributes, they need the ability to:
- bring a group of people together and provide leadership
- to listen not just hear
- to create an environment to encourage questions
- to make the right, not necessarily popular decisions
- instil confidence in other trustees and stakeholders
- ensure understanding
The recent accreditation process for professional trustees is a welcome step in confirming that an individual has these skills. We recently heard a good Chair describe the skills as being similar to the conductor of an orchestra and it’s hard to argue with that description, bringing together the multiple talents available to achieve its best effect.
The Trustee Board
We have said before the trustee board and company board are actually pretty similar in their roles and responsibilities here – https://www.cbcpensionservices.co.uk/what-do-a-trustee-board-and-a-company-board-have-in-common-and-why-is-this-important/. As such, the trustees need to have clear roles and responsibilities as well as strategic objectives. To expand on that, trustee boards need to consider:
- do they have the necessary skills and experience?
- are they able to manage change? For example, when a new trustee is being appointed is there a job description? Whether a member nominated or a company nominated trustee has been appointed, are they adding to the board skill set and able to make a positive difference?
- do they have the governance structures and policies in place? For example, sub committees with delegated powers, regularly reviewed risk registers, business plans, conflicts and dispute polices.
- good working relationships with advisers? Are they confident to ask questions until they understand points?
These attributes allow them to use their time and resources effectively to plan for the future and not become distracted by the minutiae of pension schemes.
We have increasingly seen the use of annual appraisals for trustees (not just professional trustees) which, whilst common in the workplace, have been much less so in the trustee world. Whilst we welcome this, we strongly believe that trustees should have an ongoing review process in place which enables them to raise concerns with the Chair and vice versa.
Often some appropriate training can resolve any concerns. There are lots of training opportunities around these days with virtual platforms such as TPR Trustee Toolkit mixed with training from other scheme advisers or other consultants which can often fill the knowledge gap. We are big fans of Just-In-Time training, for example, valuation training at the beginning of the process in order to make the training as relevant as possible. Training also needs to be considered at both an individual and board level.
If you’d like to know more, please contact us for an informal chat:
Email – firstname.lastname@example.org
Or call us – 07762 320 602
If you’d like to know the pros and cons of having a professional trustee – download this handy guide