The quality of trustees must improve so they can better govern and challenge their advisers, according to a panel of MPs and experts, including the shadow pensions minister.
The panel - held at the Houses of Parliament this morning - debated the future of defined benefit (DB) schemes.
Panellists agreed trustee standards need to be ramped up at a time when there are concerns about governance as well as doubts over whether trustees are equipped enough to hold consultants to account.
Scottish National Party MP Ian Blackford, who is treasurer for the All-Party Parliamentary Group on Pensions, said it was crucial to have good knowledge and expertise on trustee boards.
He said: "Trustees need a broad range of skills to interpret advice from consultants and advisers. You need to have a balance of capabilities on trustee boards to hold investment advisers to account."
Shadow pensions minister Alex Cunningham said he is keen to explore how to improve the quality of trustees, perhaps through qualifications, so they can "competently challenge their advisers rather than just take what they say as custom".
"I understand that very large numbers of trustees offer no challenge whatsoever to the experts advising them… they just accept it. Member-nominated trustees (MNTs) particularly need to be given the time to do the learning and appropriate training.
He added that perhaps there could be a point where a certain level of learning and qualification is required to serve members.
However, he supports the role that MNTs play in scheme governance:
"We shouldn't underestimate the importance of the person who asks the different question, who thinks like the members. The trade unions are good with training, with most ensuring their representatives are well-equipped, but there are lots of trustees outside the unions who don't have any support, and those are the ones I'm interested in looking at. Even if they don't get a qualification, at least they should get the training that others are getting."
SEI managing director EMEA Patrick Disney said it would be good for trustees to have more qualifications, but he put the case back to the providers of schemes. "The providers of schemes should give appropriate education to ensure trustees are well-versed in all aspects, particularly on the investment side where jargon can go to the extremes. That's how you build better outcomes because you have proper engagement between the provider and trustees."
The comments came as The Pensions Regulator (TPR) is seeking to drive up standards not just of lay trustees, but also professional trustees.
Also speaking on the panel, TPR's lead investment consultant Fred Berry said it is on the verge of publishing investment guidance for DB trustees, likely by the end of March.
"We're trying to place trustees in a better positon to have better relationships with investment advisers, consultants and managers, including fiduciary managers," he said.
"We're very clear that principle agent issues where interests between trustee and agent aren't necessarily aligned, exist in any scheme governance model.
"We will set our expectations of trustees as to how they go around examining governance structures, and identifying potential conflicts."
Berry added that by and large the "vast majority" of investment consultants are trying to do the right thing by their clients and that TPR thinks they play a very valuable role in governance.
However, he said "of course" the regulator comes across examples where consultants "could give better advice".
While he said it's "not TPR's job to directly regulate the advisers", perhaps in light of the FCA's scrutiny into consultants, "stronger regulation might be a good thing" - or perhaps there is even a role for industry bodies to play.
Pensions & Lifetime Savings Association (PLSA) director of external relations Graham Vidler pointed out that good scheme governance starts with the trustees.
"We have a hugely complex value chain in pensions, which is broadly inevitable, and it's also inevitable even though the vast majority of people are trying to do the right thing, everyone has their own interests and things will go wrong. It's ultimately down to the trustee responsible for the scheme to hold advisers and service providers to account, and one thing we're interested in is how we can ramp up governance and ability of trustees to do that job effectively."
The PLSA is looking at what can be learned from the Corporate Governance Code as to how to have the right leadership on trustee boards.
The debate was facilitated by SEI and chaired by freelance journalist Padraig Floyd.
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