Trustee Succession Planning
Briefing Note: Trustee Succession Planning
In our 50 years of independent professional trusteeship of pension schemes, we have worked with and in support of our clients in the context of succession planning, both anticipated and unplanned.
Detailed succession plans should be scheme-specific and will vary considerably depending on the current (and desired) composition of the scheme’s Trustee Board and Trustee Committees.
Gold standard governance dictates an up to date and robust (written down!) succession plan, formulated against the backdrop of the agreed scheme objectives, and should include as outlined below.
We recognize that not all boards will have judged all the points below to be proportionate to their scheme / succession planning risk:
- Trustee Board composition (as the first priority) – number of company appointed and member nominated trustees, including any provision for trade union involvement in the nomination process
- Terms of office, length (and staggering) of terms, diversity and the ‘value add’ an independent trustee can bring
- Communication materials for use with members and candidates when implementing the MNT arrangements
- Trustee Committees and Working Groups – composition and extent of delegation
- Diverse set of skills – including consideration of needs of Trustee Committees and Working Groups
- Trustee Knowledge and Understanding – skills matrix
- A role description and person specification for trustees and chairs (including committee chairs)
- MNT arrangements – including re-selection, membership categories eligible to stand for nomination, selection panel versus ballot
In addition we recommend that:
1. Pension Trustee Boards should be encouraged to review the length of term for each category of trustee regularly. Forthcoming appointments are thereby anticipated and actions can be considered, noting that:
- This facilitates existing (or emerging) gaps on the Board being identified on an ongoing basis
- Board make-up ideally takes into account the characteristics of the scheme (such as its relative size, maturity and complexity)
- The process itself should be reviewed annually
We have certainly worked with Sponsors who have had the foresight to identify suitable candidates from within their businesses to potentially become company nominated trustees in the future, and those individuals have been invited to attend as an observer at trustee meetings (in one case, every quarter, and in another other, once or twice a year). These individuals were therefore building up knowledge and familiarity before a vacancy arose. This proved quite effective.
2. Consideration should be given to introducing maximum terms for trustees generally, including chairs, with periodic (perhaps three-yearly) reviews, noting that the professional standard for independent trustees suggests a 10 year limit.
3. The process for responding to an unplanned vacancy should be robust; where necessary an interim chair or trustee should be identified from the existing board and / or committee, pending a full selection and appointment process.
4. Due consideration should be given to achieving an appropriate diversity of experience, skills and knowledge - this should increase the likelihood that the interests of all members and stakeholders are met and that the Trustee Board as a whole will make a full contribution to achieving the scheme’s objectives.
5. Appropriate resource and time should be allowed for in succession planning documents, especially when it is the chair who is being selected. The sponsoring company should be involved and consulted in succession planning, especially where the sponsor nominates trustees and/or The sponsor should be encouraged to discuss its nomination process and, ideally, candidates with trustee representatives (e.g. the chair).
6. For larger schemes, consideration should be given to pulling all of this together under the oversight of an appointments and nominations committee of the Trustee Board (much as public companies and bodies do).
In our capacity as independent professional trustees we have frequently been appointed to fill in the gaps of knowledge and experience which boards have felt they would otherwise lack.
The Covid-19 pandemic has highlighted the need for contingency planning in the event of a number of trustees becoming unwell suddenly and at the same time. This can lead to the Trustee Board putting arrangements in place, usually on a temporary basis, for additional delegations, appointments of alternates, less demanding quorum requirements etc.
Business Continuity and Good Governance: LawDeb’s Approach
When we take on a new appointment, or when there is a change of lead director for an existing appointment, we:
- Work collegiately to propose the most appropriate short list of our trustee team of (currently) 21 directors with the desired background and experience to fit scheme and sponsor
- Commit to working collaboratively upon appointment with the existing board and the sponsor, as well as spending time with key stakeholders to ensure the succession / transition is efficient and Whilst this will be scheme specific, we would generally expect the (new) lead director, as part of our induction programme, to:
- review documents and rules for the scheme, together with recent advice, reports and meeting minutes and packs
- arrange to meet / speak with company representatives, the existing chair of the Trustee Board and a selection of other trustees, in particular the chairs of relevant Committees
- speak to the key advisers to gain their perspective and insights
Business continuity and good governance dictate that for all the schemes for which we provide trusteeship services we operate a ‘business as usual’ peer director model, thereby mitigating succession risk:
- For all our appointments, we nominate a lead trustee director who is our main representative in relation to the scheme.
- For many of our larger, more complex schemes we have two or more lead directors actively involved.
- In addition, there is a named peer director who provides another pair of eyes – and valuable ongoing challenge - as well as being ideally placed to provide support and cover for the lead director.
- As well as being a day-to-day source of support, the peer director conducts a formal review of the scheme with the lead director twice a year (four times for our professional corporate sole trustee clients). This is documented on our CRM system and is subject to AAF review. This enables the directors to identify and discuss any areas of concern about the operation of the scheme.
- Should the lead and peer directors both be unavailable, we have sufficient depth in our existing team to ensure that another colleague would be able to provide cover for them.
 References in this note to trustees include trustee directors