02nd Aug 2019

We welcome consultation aimed at driving up Trustee standards

In an effort to improve standards and drive consolidation The Pensions Regulator (the Regulator) is consulting on new standards for professional trustees. The proposals will make it mandatory for a professional trustee to sit on every Trustee Board and looks at whether Trustees should have a minimum knowledge base enhanced with ongoing learning.

A new accreditation framework is to be developed to complement the standards and includes providing references, completing relevant skill testing and taking part in structured continual professional development. The framework is expected to be finalised later this year.

20-20 Trustees will certainly be participating in the consultation as this is an issue we are passionate about. Sound governance and balanced structures are vital for scheme effectiveness and while governance standards are adding to Trustee workloads – they are necessary to ensure robust governance.

However, will this driving up of standards mean the beginning of the end of the lay trustee? While the professional trustee must have technical pensions knowledge, the lay trustee is important for balance as he/she should be the expert on the business which it represents. Their focus should be on asking the ‘stupid questions’ (and we all know there are no stupid questions) and they should have a different perspective from their professional colleagues. The resultant combination of professional and lay trustees should provide sound governance and a balanced structure. Therefore, we would be disappointed if the position of lay trustees were eventually phased out entirely.

The Regulator is also asking whether it is right to ever have a sole trustee and we think this can actually be the most appropriate model in certain circumstances.  A ‘sole trustee’ does not necessarily mean an individual. It can refer to a firm of professionals, such as 20-20 Trustees, but the success of a sole trusteeship will depend on their experience and expertise.  It is a particularly relevant model for legacy or small schemes and there have been several occasions where I have recommended this to clients who have benefited from the model.

Schemes are finding it harder to find an employer and/or member nominated trustees with the suitable experience or knowledge and so an experienced sole trustee will ensure good service, cost efficiency and will not have any conflict of interest.

20-20 Trustees welcomes any decision by the Regulator that makes regular training mandatory as this will close any knowledge and skill gaps on Trustee Boards. The industry is now just catching up with other sectors that use metrics to measure effectiveness and performance and to deliver that all important value for money. We need to assess and compare the value and performance of Trustees on a regular basis – just like other boards and institutions do. It would also be a positive move to encourage more diversity – younger people, women and those from different backgrounds are sadly lacking on many Trustee Boards.

Trustees are looking after the future of thousands of people and there is still a gap between well-run and badly-run schemes – we owe it to savers to make sure every scheme is well-run.

The consultation will close on 24 September. Responses can be submitted through the Regulator’s website.