Sole trusteeship is dead: Long live sole corporate trusteeship
11 Jun 2020
Trustee Director Alan Baker, writing for mallowstreet, published 10/06/20:
We should all – whether lay trustees, professional trustees, sponsors or advisers – be aiming for the most robust and effective governance framework for our pension schemes and their members. I’d argue that this is exactly what a sole corporate trustee model can provide.
I say ‘sole corporate trustee’ because the usual term ‘sole trustee’ gives a misleading impression that you are appointing an individual, whereas ‘sole corporate trustee’ makes clear that you are appointing a company to manage your pension scheme, with access to specialist expertise and additional resources and with an effective stewardship structure to support it.
It’s also my view that the unprecedented pandemic circumstances we are facing will drive a discussion for many schemes about the potential benefits of a sole corporate trustee governance structure.
Historically, sole corporate trusteeship has tended to be a feature of small and medium-sized schemes, especially those struggling with member-nominated trustee succession-planning or facing new and complex situations such as buy-ins or wind-ups, where the training and time burden for existing trustees would have been considerable.
Historically, sole corporate trusteeship has tended to be a feature of small and medium-sized schemes, especially those struggling with member-nominated trustee succession-planning or facing new and complex situations such as buy-ins or wind-ups, where the training and time burden for existing trustees would have been considerable.
Increasingly, larger schemes are also seeing the benefit of a move to sole corporate trusteeship.
Many schemes are already in fact now operating something more akin to a sole corporate trustee model, being forced to drop big set-piece quarterly meetings and convene decision-making meetings much more frequently, and seeing the benefits of shorter, more focused discussions and more nimble decision-making. It’s more than that however…
The Pensions Regulator’s order of the day is to drive up governance standards, and that is exactly what the sole corporate trusteeship framework offers. It is at heart a consolidation option to enable a rigorous governance structure that can build on the established processes and procedures already in place on the trustee board.
Trustee boards will come under increasing challenge: even ‘pre-Covid’, large, mainly lay boards were already facing pressures in terms of decision-making and agility. Sponsors and trustees focused on delivering maximum value to members will, I believe, increasingly point to a new way: a future where meetings are run much more efficiently, training requirements are minimised (professional trustees on sole corporate clients do that in their own time!), a lack of knowledge is unacceptable and transparency of decision-making is key.
Sole corporate trusteeship offers all of the above. In particular, you do not rely on one individual, however knowledgeable.
Enough grandstanding!
From my vantage point as part of a sole corporate trustee, I have seen the benefits play out first hand in many ways, including:
- Being challenged by a nominated peer at least once a quarter: are we making sufficient progress against the long-term plan, are we managing the risks, both short-term and long-term? Additionally, I frequently call on the deep expertise and experience of my 21 other trustee director colleagues: this provides the diversity of thinking that is increasingly an area of focus for the Pensions Regulator.
- Engaging with former lay trustees who might form part of a ‘consultative committee’ to continue to represent a member perspective without having to carry the full burdens of trusteeship and to provide reassurance to the wider membership;
- Being able to accelerate buy-in to buyout journey plans very successfully, as shown by BBA’s buy-in last month, a sole corporate trustee client of ours for two years;
- Establishing a commercial but firm relationship with the sponsor: regular meetings enable us to move things along quickly and discuss innovative solutions, but we also stand our ground when necessary;
- Providing sponsors with quarterly stewardship reports that ensure independence in oversight and the highest standards of scheme governance and are highly valued by the sponsors we work with; and
- Providing real-time governance solutions and decision-making when needed, eg in the current Covid-19 crisis, always with a view to providing value for our scheme’s members.
I believe sole corporate trusteeship is the future for many schemes, especially on the road to the end-game: I anticipate challenge and look forward to your views!
Trusteeship, fully integrated with our Pegasus pensions executive service, ensures an all-encompassing governance solution, with Pegasus colleagues evidencing the rigour of approach and providing wider pensions exec and support roles, as required. In addition they are experts in transition to sole corporate trustee.
For Pegasus queries, please don't hesitate to contact Kathy Turpin, Senior Pensions Executive