Law Debenture Pension Trustees in response to The Pensions Regulator announcing new measures
Robert Thomas, Director, Law Debenture Pension Trustees comments:
“We welcome TPR’s publication of its response to its consultation on the future of trusteeship and governance, which signals an important development in TPR’s regulation of and support for trustees.
At LawDeb we have championed the idea of developing an industry code for sole trusteeship because we consider well run sole trustee models are part of the governance solution rather than part of the problem. We welcome TPR’s recognition that trustee firms adopt different models and we consider that those like ours that employ trustee directors are generally best placed to operate free from conflicts of interest.
We agree with TPR’s stance of encouraging, rather than attempting to mandate, greater diversity and inclusion on trustee boards. We believe the requirements to govern, for example, an open DC scheme differ widely from those of a closed DC scheme and that in all cases diversity should be considered in the context of the needs of the board. We actively set out to employ trustee directors with a diverse range of knowledge, backgrounds and professional experience. This serves us well in sole trustee appointments and when matching skills needed on particular boards. Our experience is that we can influence the composition of boards through working with employers who appoint company representatives and through member nominated trustee selection processes.
We agree with TPR that it is not appropriate for every scheme to have a professional trustee on board, and welcome its emphasis on the different expectations attaching to different trustee roles. In particular, we support TPR’s proposals for lay trustees in general to have a lower CPD requirement (15 hours) compared to professional trustees who will be required to follow the industry standard of 25 hours.
TPR still expresses some concerns with sole trusteeship in its response. As we set out in our original response to consultation, we are clear that sole trusteeship should not be seen as a way to cut corners by diluting governance standards. However steps can be taken to ensure a robust and effective governance framework for sole trusteeship. Whilst TPR does not currently propose to make any changes to schemes operating a sole trusteeship model, we think there are steps it could take to address its concerns, for example:
- Requiring two trustee directors to be named on the Scheme Return as representing the sole corporate trustee in connection with the scheme
- Minimum headcount for a corporate entity acting as sole trustee
- Undertakings provided as part of the annual return for professional trustee firms who offer a sole trustee service
- A module in the Award in Pension Trusteeship, relating specifically to knowledge of sole trustee risks and mitigations could be developed and required for those wishing to offer a sole trustee service.
Law Debenture is actively involved in the Association of Professional Pension Trustees (APPT) sub-committee looking at extending the current code to include specific provision for sole trustee (corporate) appointments. TPR is involved in this exercise and we look forward to further discussions.
Finally, we note TPR’s proposal to set up an industry working group to provide good practice guidance and practical tools to improve diversity on trustee boards rather to introduce a mandatory diversity reporting requirement. We think this is a proportionate approach. However, TPR will need to ensure that the group considers the whole range of diversity, including educational background, skills and experience as well as gender diversity.”