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Corporate Sole Trusteeship: an efficient and effective means of governance for pensions schemes large and small

The term sole trusteeship can bring to mind the image of a sole trader working from their bedroom, and the risks associated with that. The Association of Pension Professionals’ October 2020 publication of a new code of practice, setting out rigorous new standards for professional trustees carrying out sole trustee appointments, will put paid to any sole operators working without a supporting governance framework. 

At LawDeb we have been acting as ’sole trustee’ for over 50 years and have long used the term Corporate Sole Trustee (CST) to denote the professionalism of our approach. We have seen the rise in popularity for CST, particularly in the last 5 years. What is even newer is the interest of larger schemes, those with over £1bn in assets, in the CST model. 

We expect that the unprecedented pandemic circumstances we are facing on top of the ever-increasing regulatory burden will drive a discussion for many schemes about alternative governance structures. 

During the pandemic we have seen many schemes start operating something more akin to a CST 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. 

We believe CST can provide a very efficient and effective means of governing larger schemes, however scheme stakeholders do perceive disadvantages which have delayed the uptake.

In 2020 we ran a roundtable to hear from a selection of leading pensions professionals to get their take on the outlook for moving to the CST model for larger pension schemes. LawDeb’s Robert Thomas and Alan Baker hosted the event. Our contributors were:


Tony Clare - Was Partner, Actuarial and Pension Services

Sankar Mahalingham - Director, Total Reward and Benefits


Aaron Punwani - Chief Executive Officer

Nathalie Sims  - Partner, Head of Strategic Pensions Relationships 


Fuat Sami - Partner

Georgina Stewart - Director of Business Development

Why has large scheme interest in CST been slow to build?

Fuat Sami, Sackers:

It strikes me that whereas for smaller schemes the efficiency gains forecast under a sole corporate trusteeship model might outweigh the disadvantages, this may not be the case for larger schemes.

Larger schemes are very likely to have more Member Nominated Trustees to draw on (a feature in many cases of the scheme still having significant connection with the underlying business); where smaller ones can really struggle on that front.

Larger schemes with longer to get to maturity and who are well used to and comfortable having larger Boards are unlikely to see sole corporate trustee as an immediate or valuable alternative model.

There is also a cultural and political dimension to bring out. Larger organisations with larger schemes are more likely to have strong cultures, an established way of doing things and very clear ideas about what good governance looks like. There may well be unions and moving to a model which moves away from member representation is likely to encounter resistance.

Bringing about change in larger organisations is not an easy thing to do and there needs to be a very compelling reason to carry people with you.

Allied to that for corporate decision makers there is perceived loss of control if the management of an important stakeholder is handed over to a third party with no connection to the business.

Nathalie Sims, LCP:

We mustn’t overlook cultural sensitivities in this discussion: many MNTs consider being elected to the Trustee Board very prestigious.  It is their opportunity to ‘give back to the business’ and we know this could possibly result in the sole corporate trustee model sitting uncomfortably with some boards.

Tony Clare and Sankar Mahalingham, Deloitte:

Whilst we could all, I know, talk to positive sole corporate trustee outcomes, with improved member outcomes off the back of business (sole corporate trustee) to business (sponsor) discussions, we do have to address the negative connotations, where on account of less obvious diversity the model might indeed be considered a ‘stitch up’ between Corporate and Trustee.

What are the drivers that prompt an interest in CST?

Aaron Punwani and Nathalie Sims, LCP:

We certainly see situations where the sole corporate trustee model has benefits, including: complex projects; efficiencies; agility; corporate activity; de-risking – all of which are obviously very relevant to larger schemes as well.

A move to sole corporate trusteeship often needs a specific catalyst, such as when there is a clear need and desire for a different governance model.

In the context of larger schemes we have experience of overseas parents embracing the sole corporate trustee model: they’ve limited UK pensions expertise and are eager to professionalise the relationship(s) with their UK schemes.

Fuat Sami, Sackers:  

I’d echo your point Aaron about how sole corporate trusteeship can be beneficial where specialist expertise can be brought to bear on bespoke, fast moving projects and we have seen some of that, certainly.

I’d also add that the sole corporate trustee framework seems to resonate more loudly with ‘legacy schemes’: where there is a clear disconnect between scheme members and the business, perhaps as a result of an acquisition or where the scheme is closed to active members and most of the deferred members in the scheme have already moved on to a different employer.

Are there types of scheme or sponsor where CST is seen as less suitable?

Aaron Punwani, LCP 

There are certainly larger employers who would resist giving up the flexibility of having their officers on the Trustee Board. Where conflicts can be managed, both companies and trustees often see a benefit of there being trustees who are closely connected with the business. In heavily unionised industries we also see the traditional Board model winning out, especially where schemes are open to accrual and Member Nominated Trustees are still heavily involved on boards.  

Fuat Sami and Georgina Stewart, Sackers

We agree that achieving appropriate diversity under sole corporate trustee is a real concern, as flagged by the Regulator; where larger employers are listed companies, this concern is very likely to put them off the model for what you might call political/cultural reasons.

The perceived lack of control is also a very real concern.

Many large schemes can still staff their boards with good experienced people who know the business. They are used to robust and diverse discussions. In addition, a lot of scheme business is done at the sub committee level so a sole trustee model would be an odd concept to them.

Where larger employers have big in-house teams, they already benefit from deep in-house knowledge and established areas of specialism, which on the face of it means  the sole corporate trustee model is less immediately attractive / relevant.

Practically, within larger businesses one of the challenges is establishing who will ultimately make the decision to even consider transitioning to sole corporate trustee. You’ve a great deal more people to convince  about the potential merits/benefits.

Will CST become as standard an approach as getting an Independent Trustee on the Board?

Georgina Stewart, Sackers:

Only a very small number of our clients are sole corporate trustees which reflects our perception that this model has not penetrated larger schemes to any significant extent.

I know we’ll come on to talk about the challenges in transitioning to sole corporate trusteeship but in terms of sectors we find that the Oil & Gas; Pharma; Financial Services sectors are less likely to have professional trustees on their boards.

Tony Clare and Sankar Mahalingham, Deloitte:

It is  worth drawing your attention to a recent survey of the Independent Pension Trustee sector Deloitte has recently completed.

Highlights include:

  • 45% of the schemes surveyed now have an Independent Trustee involved;
  • 20% of the market is now sole corporate trustee;
  • Average size of sole corporate trustee mandates is still less than £50 million.

We would expect half the market to be sole corporate trustee in the medium term and would add to the potential benefits list that has built up over the course of these opening remarks: mitigating conflicts of interest as well as succession planning.

What steps would a sponsor take to transition to CST?

Nathalie Sims, LCP:

Group thinking remains a very important factor in Trustee board decision making. When moving to a Sole Trustee model, clear communication ahead of the transition to sole corporate trustee is crucial.

Evaluating the checks and balances that exist in specific sole corporate trustee frameworks available on the market is also key.

We certainly see the concept of ‘Group Trustee’ being an interesting one and have experience of overseas parent clients engaging. A German parent, for example, with 5 schemes has engaged 5 different professional trustees, from the same firm thereby in their minds ensuring diversity and robustness of challenge whilst also benefitting from a commonality in overall approach.

We also see clients test the water, as it were, with sole corporate trustee, transitioning one of their smaller schemes first and once comfortable with the model, transition further schemes.

Tony Clare and Sankar Mahalingham, Deloitte:

We feel there is probably a lot more awareness raising to be done.

Amongst corporate advisory, for example, colleagues want to understand what a Company can do legally in the context of a sole corporate trustee framework and what transition looks like, legally and in practise.

Do you for example include incumbent trustees to sit on the sole corporate trustee election panel? We’ve seen this work really well in transition. I know others will have other example where perhaps things haven’t been thought through properly and this has become  fraught with difficulty for all reasons we’ve already touched on.

We engage regularly with the executive community on their trusteeship options more broadly: including sole corporate trustee as one of the models that they might consider, especially where the current governance model is under review as this is often the catalyst for the broader discussion.

Worth noting that for many senior executives these days they have no experience of DB plans – before their times!

Fuat Sami, Sackers

Positioning and transitioning to a sole corporate trustee framework is challenging and can result in mistrust if, as discussed at the outset of this roundtable, the move is sought when something has recently gone wrong.

The context to change is therefore very important and our experience is that when things are going well, sponsors won’t necessarily wish to make large scale changes to the way their pension scheme is managed. But what is really important in this debate is the weight which is allocated by the decision makers to all the competing factors and considerations – it is not a “one size fits all” issue.

Aaron Punwani, LCP:

Which I think brings us full circle to the fact that sole corporate trustee is not for everyone and needs to be considered on its merits, case by case.

There are clearly pros and cons; our challenge is to you LawDeb and others to commit to clearly articulating both such that Sponsors and Schemes are in a position to consider this framework, in the interest of best long term outcomes for their members.

LawDeb Summary

It is clear there is still work to do in demystifying the CST model. It is interesting to hear from those advisers close to many of the UK’s largest schemes about the main concerns, and comforting that we know that, for many, we can mitigate them by applying our robust governance framework. 

If you are interested to understand more about how CST can be applied to your pension scheme please do contact Alan Baker.