FAQs about Corporate Sole Trusteeship
Is corporate sole trusteeship suitable for large schemes?
To date corporate sole trusteeship (CST) has been largely considered a governance solution for small schemes where the efficiencies it delivers are clear. In part, the concerns for larger schemes are driven by the idea of a ‘sole’ trustee. The reality is a team approach with at least two accredited trustees making all decisions as per The APPT Code of Practice for Professional Corporate Sole Trustees.
Larger schemes interested in CST will undoubtedly require larger governance models which might include, for example, a Consultative Committee consisting of former trustees and members to provide historical knowledge of the scheme and sponsor.
Another concern for larger schemes is the apparent lack of diversity delivered by a CST. Again, this concern is often allayed when LawDeb’s team approach to CST is fully understood. Our team approach sees each Trustee Director have access to the wider team of 22 Trustee Directors, which brings diversity of outlook and perspective to the decision-making process.
Last year pension professionals from Deloitte, Sackers and LCP joined us to discuss this topic - read the discussion here.
How does CST ensure best-practice governance?
Our experience suggests that best-practice governance cannot be delivered consistently without a team-approach in place.
A CST should work to an established framework. Our framework includes:
- a nominated trustee director to oversee the plan as Lead Director
- a second named Peer Director working alongside the Lead providing support, diversity and challenge
- additional Directors involved as necessary (e.g. where specialist knowledge or experience is required, where non-routine decisions are being made or where spikes in activity require it)
- flexible reporting structures tailored to the sponsor’s preferred level of engagement, based around stewardship reporting and/or stewardship meetings and peer reviews
- our Pegasus Pensions Executive team who put the rigour and control around our processes, provide governance support and can fulfil the role of outsourced pensions executive
- continuous decision-making which is not constrained by the typical trustee meeting schedule
- documented protocols for decision-making designed to achieve transparency
Where a CST is operating without such a framework it is unlikely that best-practice governance is being delivered.
Why would a scheme move to corporate sole trusteeship?
A move to CST often has a specific catalyst, such as when there is a clear need and desire for a different governance model. Typical situations which can prompt the move include:
- complex projects;
- difficulty filling trustee boards;
- corporate activity;
- time pressure on corporate stakeholders.
We also see CST being popular with overseas parents. They often have limited UK pensions expertise and are eager to professionalise the relationship(s) with their UK schemes.
What steps would a sponsor take to transition to CST?
A common approach when moving from a traditional trustee board to CST is to appoint the CST first as an independent professional trustee (IPT). Once the IPT has a good understanding of the scheme the scheme stakeholders often feel more comfortable making the transition.
Alternatively the CST can immediately replace the trustee board. Here we encourage meetings between the CST and key stakeholders to ensure key knowledge is retained and a smooth transition achieved.
Regardless of which approach is followed, communication with key stakeholders and members is key. Effective communication and explanation of the CST model in advance can help allay any of the concerns highlighted above.
We have transitioned numerous schemes to CST, both where we acted as IPT and also where we came in directly as CST. To find out more about how the process can run contact firstname.lastname@example.org