The watchdog should revisit its new description of professional trustees to clearly distinguish them from other types of trustee, according to the Pensions Management Institute (PMI).
It comes as The Pensions Regulator (TPR) has been consulting on the new definition, which it uses to decide whether to impose a monetary penalty and the amount.
Getting the definition right is crucial given that TPR's draft penalty policy, which has been consulted on at the same time, is likely to impose a higher penalty on a professional trustee than other types of trustee. The watchdog expects them to show a greater level of knowledge and meet higher standards of care than other trustees.
In response to the consultation, the PMI and Association of Professional Pension Trustees included the results of a joint survey of their trustee group members, which suggested more work is needed on the revised description.
The regulator has previously defined professional trustees as those who charge for their services as a trustee rather than just reclaiming necessary expenses, or who hold themselves out to be experts in trustee matters. Now, it thinks it more appropriate to consider whether a trustee is acting in the course of the business of being a trustee rather than focusing on charging, given the increasing trend for trustees to receive some form of financial compensation.
While all 13 trustees who were surveyed agreed with TPR that it should be defined as someone who ‘holds themselves out' as someone with a particular expertise in trusteeship, they did not agree on what that amounts to.
PMI technical consultant Tim Middleton told PP: "The trustees said they could recognise a professional trustee if they saw one working, but they actually find it quite difficult to define the characteristics. It suggests the regulator will have to do a bit more work in terms of how it defines a professional trustee and make it distinct from other types of trustee."
Ten respondents agreed that someone who is appointed to more than one scheme is a clear distinction from lay trustees, while just six said remuneration.
"The idea of someone demonstrating expertise and advertising that, such as offering services via a website or a business card, is holding out. Maybe we could do more work on what holding out constitutes," said Middleton.
The trustees were split when asked if it was clear what ‘in trustee matters generally' means, with one warning that vague description can end in disaster, while another said it should very specific.
The respondents were also heavily divided over whether it should be mandatory to have a professional trustee on the board, with half in disagreement.
"TPR has had an expectation that most schemes should aspire to appointing a professional trustee, but this depends on a scheme's circumstances," said Middleton.
"If a small scheme is being fairly well-managed and has no governance problems, then there's no compelling case for appointing a professional trustee, and it's only really likely to be an issue for larger schemes that deal with more complex issues and may have the budget."
A majority of trustees also believed that when there is a professional trustee on the board, they should not necessarily be the chairperson. Middleton said just because the trustee is professional, does not necessarily mean they have the required skillset to chair the scheme; other trustees might be more competent.
The regulator's consultation on its draft monetary penalties policy and revised professional trustees description ended on 9 May.
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