Briefing Note: Pension trustee skills, capability and culture – LawDeb’s position

A good trustee:

• Has a wide-ranging general understanding of pensions issues including investment matters, plus specific areas of expertise and can challenge advisers from a position of knowledge.
• Is aware of when expert input is needed and understands how to obtain this from colleagues or other advisors.
• Has strong communication skills and works in a collaborative way that supports effective decision-making.
• Can provide leadership but also encourages others to express their point of view.
• Can identify and manage conflicts of interest.
• Has sufficient time to commit to continued training and development.

LawDeb believe most schemes would benefit from having a professional trustee, but this is not the only model which can support a well-run and effective board.

Professional trustees and lay trustees:

• Professional Trustees are generally members of firms made up of individuals with diverse and varied backgrounds and experience. They have access to a wide source of collective experience across a diverse range of schemes as well as an established network for obtaining quality advice.
• Lay trustees can provide a deeper understanding of both the members and the sponsoring employer and provide a different perspective, but it’s important they have sufficient time to perform their trustee duties.
• Part of the role of a professional trustee, is to help to support effective governance and good decision-making, including helping lay trustees contribute effectively.

Corporate Sole Trustee (CST):

• A corporate sole trustee replaces a traditional trustee board, taking responsibility for pension scheme governance and becoming a trusted point of contact for all aspects of the scheme. It’s an increasingly popular model for pensions schemes looking to streamline their governance particularly where it is becoming difficult to find new trustees.
• Under the CST model, decisions can be made in real time as and when needed, removing the need for formal trustee meetings which can be replaced by less formal catch-ups with the sponsor as required.

Accreditation, training, and development

• In our support for mandatory accreditation of professional trustees we feel the current requirements, which have been in place for a few years could be made more robust.
• We see accreditation as being akin to a ‘fit and proper person’ measure. We support a robust selection process during which an individual has to evidence their relevant skills and experience, including at least one interview. This is the approach that we take when recruiting professional trustees. We test this by requiring a number of years’ relevant experience in the pensions industry or another relevant industry, together with demonstrable relevant soft skills.
• It is important that the accreditation framework provides a thorough understanding of investment matters so that accredited trustees are able to challenge investment advisers and ensure that a full range of investment options is considered by trustee boards.
• We do not support a requirement to have a minimum number of accredited trustees on a trustee board. While a professional trustee can bring benefits such as supporting good governance, decision-making and helping lay trustees, setting too high a bar for all trustees would likely limit the diversity of trustee boards.
• For Master Trusts, the existing requirements, and the high proportion of professional trustees on these boards make any minimum requirement for accredited trustees more reasonable. However, there should still be room for non-accredited trustees, for example younger people to better represent the members better and bring skills such as social media and digital.

At LawDeb we are passionate about delivering value for our clients and pensions scheme members. We believe that ongoing trustee training and development is essential in doing so.

Vicky Paramour, Managing Director LawDeb Pensions