Beware Trustee Trainers bearing gifts!

Brian Spence

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I’m frequently asked why anyone would want to become a pension scheme trustee and it is undoubtedly a question which is becoming increasingly difficult to answer.  The Pension Regulators Code of Practice for Trustees has clarified the level of responsibility of trustees, provided guidance how to perform the role as well as a benchmark against which trustees can be judged.  It would seem that the days of the well meaning but ultimately ill-informed amateur are long behind us. It is now impossible for trustees to be unaware of their responsibilities and in agreeing to perform the role they must accept that they have a personal, non transferable liability and that ultimately the buck stops with them.

At the moment there is no suggestion that a mandatory qualification will become a requirement but there is little doubt that having voluntarily gained such a qualification confirms that the trustee understands their role as well as providing a useful defence if their ability or knowledge is challenged.  Whilst a formal qualification is not a requirement at this stage, trustees need to keep a formal record of how they have kept their knowledge up to date. This is similar to the “continuing professional development” records required by many of the professions.

These factors have undoubtedly lead to an increased requirement for trustee training but what type is most suitable.  The type of training required is likely to fall in to three distinct categories:-

    1. Generic trustee training

Much of the demand for this type of training will be picked up by the Pension Regulators ‘Trustee Toolkit’ available at http://www.trusteetoolkit.com.  The Toolkit now covers 11 sections  including the trustees role, pensions law, fund management and DB Funding and allows trustees to work at their own pace and in their own time and to keep a formal note of their achievements.
Trustees may additionally wish to support this learning approach with attendance at a structured trustee training event and this might be particularly valuable for new trustees and as a refresher for trustees who have not attended a formal training session for some time.
It is important that trustees are provided with this training from a source independent of their usual advisers.  The Pensions Act seeks to encourage trustees to be sufficiently qualified and confident to question and, if necessary, challenge the advice they are given by their professional advisers. Our experience suggests that the courses offered by consulting firms can tend, at best, to promote their “house” views and at worst, be viewed primarily as a business development exercise.
I believe that this training requirement can be best met via independent professional courses, such as those run by bodies such as the National Association of Pension Funds (NAPF). These courses are available across a number of locations and offered at a variety of times and durations and offer the truly independent training which is needed. There is also the PMI “Trustee Certificate of Essential Pension Knowledge” qualification, study for which should not only cover the basic requirements of generic knowledge but also result in a formal qualification at the end of the study period.

    1. Bespoke Trustee Training

Trustees will also require very specific training which will provide guidance related to the documentation and processes adopted by their individual scheme.  This training should be run in close conjunction with the pension scheme advisers and must cover the core areas of responsibility as they directly impact on their own scheme.  Ideally this training process will also result in specific outputs formulating the scheme trustees approach to areas such as scheme governance, adviser selection and investment monitoring.

    1. Ongoing Training and Development

In the past trustees generally had the opportunity to attend a single generic trustee training session, usually shortly after their appointment.  The “trustee training” box could then be ticked and in many cases, forgotten about.  It is clear that this will no longer be adequate and trustees will need to demonstrate how they have maintained their ongoing competence to act.  Ongoing training and development can be formal i.e attending seminars on topical pensions issues, or informal such as reading relevant publications, or simply gaining experience from doing the job, attending meetings and working with advisers on various issues.  The important addition here is the requirement that whatever its type it is formally documented.

The training approach and requirements will be different for each scheme, not to mention potentially for each trustee, and it would seem sensible for each Board of Trustees to construct a training plan outlining their objectives and timescales. Each board should also agree a structured approach to evidencing both formal and informal training and development.

There is little doubt that standards in this area needed to be raised and the implementation of the code of practice will provide a sound foundation but as ever its effectiveness will be shown by how consistently it is implemented by trustees and scheme sponsors, particularly in terms of the time and financial commitment required to keep trustees abreast of what is expected of them.

So for anyone prepared to take on the role of a trustee there is a much clearer framework within which to work and the expectations are much more clearly defined.  There is no doubt that better qualified and informed trustees can only be of benefit to scheme governance and trustees and scheme sponsors should by now have plans in place to meet the standards required as while there may be no intention to make all trustees “professionals,” those prepared to perform the role of lay trustees will be expected to act in a professional manner.

ENDS

Brian Spence

Post by Brian Spence

Fellow of the Institute and Faculty of Actuaries and Society of Actuaries in Ireland, scheme actuary, professional pension trustee

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