What does a good pension trustee look like?
Since the Pensions Regulator (or as we call them ‘our friends in Brighton’) launched its 21st Century Trustee initiative back in 2016 there has been plenty of discussion around this important topic.
Three years on, how has this impacted you? Do you feel your trustee board and individual trustees are fit for the purpose of running a pension scheme?’
As a reminder, the purpose of the initiative was to make sure that pension boards have
- clear roles and responsibilities and clear strategic objectives
- a skilled, engaged and diverse board led by an effective chair
- close relationships with employers, advisers and others involved in running the scheme
- sound structures and processes focused on outcomes a robust risk management framework focused on key risks
What are some of the ways you can assess how good your trustees are?
Take the time to carry out a review
Trustees need to measure how effective they are being.
- Take time to consider how the trustee board is working
- Do a gap analysis of trustee skills (not just pension skills)
- Identify how long it takes to make a decision and build this into your ‘business as usual’ function, not something which is filed away and never reviewed
- Understand your roles and responsibilities
A review will help identify any potential weaknesses and, as importantly, the solutions as to how these can be solved. It will help you be effective and proactive in directing and supervising your scheme whether it’s defined benefit and/or defined contribution. Such reviews should be built in as a regular activity to ensure you are on top of all the issues which Trustees face.
Make sure you are on top of your Trustee training
Always the elephant in the room, developing and maintaining a trustee training plan is essential for all trustee boards.
This is much more than having the base level Trustee Toolkit knowledge. Any training plan has to accommodate the need to get a new trustee up to speed as well as being able to meet the needs of more experienced trustees.
- A ‘Got, Gap, Get’ analysis will help identify potential training needs.
- Using advisers’ training sessions which are usually free is a good source of knowledge
- Meet with fellow trustees who may be grappling with the same issues that you are
- The Pensions Management Institute’s Trustee Group is an inexpensive tool to help with trustee training.
Assess whether your Trustee Board has the right skill set
Just as for different successful companies, trustee boards that have diverse skill sets can be as successful in running their particular scheme.
There is no magic ‘one size fits all’ make up for a trustee board. Whilst pension knowledge is important, don’t overlook the soft skills that all boards need, for example, the ability to collaborate with other scheme stakeholders.
A board which has diverse skills and backgrounds can avoid the dreaded ‘group-think’ where people all share similar opinions which stifles creativity and reduces challenges to the status quo (not a good thing).
The ability to recognise potential and real conflicts of interest, come up with potential solutions and to develop practical action plans are critical skills for every trustee board. The trustee board with a diverse skill set it likely to have better results.
This diversity invariably means the board has trustees who feel confident and supported enough to ask the silly question – which is never silly. It means that if someone has not explained themselves sufficiently for a trustee to make a decision, they will be happy to challenge them.
- Have you identified what skill set your board needs?
- Have you any gaps and what do you need to do to fill them?
- Do you have a succession plan so that if someone leaves, you know what you need to look for?
- Do you have a robust recruitment plan with the criteria that potential new trustees must fulfil before being considered?
- Have you got the right mix of people on your board?
If you’d like to know the pros and cons of having a professional trustee – download this handy guide
Other blogs you might find useful…
Pension Trustee training – are you up to date?
Governance – Do you meet the standards of the Pensions Regulator?