Pension trustees need more time and soft skills, not more regulation – Investment

Delegates at the Pensions and Lifetime Savings Association’s (PLSA) annual conference in Liverpool heard experts discuss the role of trustees across the industry.

Harus Rai, managing director at Capital Cranfield and chair of the Association of Professional Pension Trustees, said the landscape for trustees had improved vastly since the Maxwell scandal in the 1990s, but challenges remained including a “huge governance burden” that had led to challenges in recruiting member-nominated trustees.

Rai said change was taking place at a rate that not even professional trustees could keep pace with.

“Unless trustees are given the chance to do the role, you are going to see more and more saying they are not going to do this,” he explained.

Rai added: “Exams won’t make you a good trustee. I’ve seen outstanding ones who are not good at exams.

“For example, what exam can teach you how to cope with a finance director screaming in your face?”

More time needed

Chris Hogg, a former head of the National Grid and Royal Mail pension schemes, agreed.

“There is a challenge around sourcing lay trustees, particularly in the defined benefit space where there is a sense of legacy,” he said.

Hogg added that bringing in accreditation and ongoing assessment was the logical next step, but this too would involve “more time”.

Krista D’Allesandro, a senior policy adviser at the PLSA, said more diversity would be needed among trustees with diverse knowledge and skills to prevent “groupthink”.

The panel agreed this could be done by encouraging young people and those of ethnic minorities to take on a trustee role.

Rai agreed the pool of potential trustees needed to be expanded in other ways.

“We do not allow deferred members to put themselves forward, which means you are cutting off a pipeline of potential trustee talent,” he said.

Other ongoing challenges included guidance over conflicts of interest.

Rai explained: “There has been such a debate, you can’t go by a day without someone raising this topic, so there needs to be guidance and clarity around [conflicts of interest].”

Increasing regulation

The panellists also discussed the impact of the Pensions Regulator, which is starting to engage with what it believes are “systemically important” professional trustee companies.

Rai said he saw no issue in more regulation. “We make decisions on millions and billions of pounds so I have no problem with the regulator coming in and examining what we do,” he said.

“If it raises standards and improves member outcomes, how can we argue against it?”

Further reading

TPR to scrutinise ‘systemically important’ professional trustee firms (3 May 2024)

Professional and sole trustees dominate scheme management, data shows (24 September 2024)