Should all UK pension schemes have an independent professional trustee?
So what does an IT bring to the scheme that could reduce risk?
Of the enquiries we received in 2017, over 80% list in-depth pension knowledge or experience of a specific pension challenge, such as derisking, as key factors for the appointment. Whilst in many ways a trustee's role is not pension-specific but more about the ability to make sound judgment based on the information provided, schemes that have an IPT benefit from someone who can process information quickly and add their own experience to the decision-making.
Of course, a newly appointed IPT has to pick up the institutional knowledge that aides decision-making and which can ease communication with members, particularly on schemes where members are unhappy about past actions, such as a move from RPI to CPI. The independent nature of an IPT can bridge the knowledge gaps by encouraging the trustee board to share insight more effectively, which positively impacts decisions.
How much difference can an IT really have when the sponsor’s future is uncertain?
No trustee, independent or otherwise, can prevent a sponsor from bankruptcy. However, an experienced IPT may help the trustees look beyond the obvious and take steps to protect the scheme before the problem arises.
Conversely, there may be situations where trustees are unduly concerned and the IPT may help the board reach proportionate conclusions on what should be sought from the sponsor.
In addition, the speed of decision-making on boards with an IPT is often noticeably faster than one without, and these small steps alone can be enough to protect more member benefits than would otherwise be the case.
And what can you, as a trustee board, do now to protect your members?
- Learn from others – whether that is from other schemes and how they have dealt with situations or from your fellow trustees and advisers – take an interest in what they say and ask them questions about their experiences.
- Do your homework – ensure you are up to date with your scheme documents and industry resources, such as the tPR Trustee Toolkit.
- Monitor the situation – how engaged is the sponsor with the trustee board, and what corporate decision are they making (eg generous dividend payments)? Ask for updates on the implementation of decisions you made in your meetings from the trustee’s and the sponsor’s advisers.