This week, F&C investments published their 2013 Independent Trustee Survey. Over 100 Independent Trustees gave their views on a number of issues that effect pension schemes in the 21st century.
One of the key questions posed was “what is the biggest challenge facing lay Trustees”? Just over a third cited insufficient knowledge; a third cited increased regulatory demands while a further third just said they had insufficient time to fulfil their role as a Trustee.
Perhaps as a result of these views there has been an increase in professional Trustees being appointed, a fact that does not probably surprise anyone within the industry. Nearly half of the respondents said that the rise in regulatory demands have led to this increase. Again a fact that is not surprising if you take a moment to reflect on the changes that have been made in the past 5 years and the constant overhauls that have been made to pensions by successive governments.
Having said this, it is clear that there is still a place for member nominated Trustees provided that they are committed to the role and are given the time to carry out their duties. The survey was evenly split as to whether they were well equipped to carry out their responsibilities.
In the wake of the G P Noble saga, the Independent Trustees surveyed were split on whether or not their role should be subject to heavier regulation, with 42% in favour of such a move. However, some of the respondents were clearly concerned that “one bad apple” would lead to over-regulation.
The role of a Trustee is ever more complex and funding levels were named as the one thing that keeps a Trustee awake at night. This particular area is virtually unchanged from last year’s survey and I suspect will be at the forefront of Trustees minds for a good few years to come. De-risking, reduction in equity exposure, buy ins and buy outs are all being considered by the majority of Trustees. However fiduciary management is not something that is expected to be widely adopted over the next 3 years and one reason highlighted was cost.
Investment consultants were a major concern and 96% of respondents felt that there was a potential conflict of interest where the consultant promoted the products of their own company. How this conflict is managed is key.
This survey acts as a very useful barometer to views in the Independent Trustee community and a number of themes concur with what we are seeing elsewhere in the market. As more schemes move into an “end game” phase, we would expect the proportion of schemes with an Independent Trustee to continue to rise and their role to become more key.