Member-nominated trustees may not be feasible for master trusts, but representatives could improve communication with members, says Barry Parr
Professional Pensions calls for a higher level of member representation on master trust boards - and perhaps bringing in people without specific pensions backgrounds. Of course, this sounds very creditable but it is naïve.
Most auto-enrolment master trusts - when they are through the authorisation challenge - will have thousands of employers and tens or hundreds of thousands members. So how would a master trust select one or more representatives?
Some older defined benefit (DB) multi-employer schemes have done exactly that in the past. The selection and appointment process can easily cost £250,000, especially if using an Electoral Reform Society process, for example.
We should ask who will pay that cost in the defined contribution (DC) master trust world when most master trusts are not yet in profit - and recognize that there is typically no big corporate standing behind the master trusts as in the DB world.
So perhaps the cost should be passed on to members. Will they feel better represented by one or two inexperienced employees of companies with whom most members will have no connection or contact?
The commitments required now from trustees of active master trusts are many times greater than has been the norm in a single company trust. It's no longer a couple of days per month at most. It is typically many interactions per day as well as the usual reportage but now multiplied through authorisation demands. Will employers be happy to gift that time for their employees to participate?
I have a better suggestion...
Certainly, it would be helpful to members and to the master trusts if there were still individuals within companies (let me call them member-nominated representatives, or MNRs) able to ‘sell' the virtues of pensions and able to explain to members how pensions work - especially in respect of retirement options.
There has been much discussion about the need for DC members to receive advice and their understandable reluctance to pay for it, especially for lower pot values. I think there is so much more which could be done.
Some enlightened employers, often bigger groups which have chosen contract schemes in the past, have set up internal pensions committees which can appraise their supplier, review member options and demographic profiles. The better ones may also look at how members can improve their likely outcomes - perhaps by contributing more - and guiding the comms to best achieve that.
As I see it, there is every reason to think that these internal pension ‘representatives' could deliver a package of information for members at mid-life and pre-retirement. We all know that they cannot ‘advise‘ - but to a great extent members most need to understand simply how a pension scheme works, what retirement options they have, and the potential impact of taxation. I think it feasible that certain presentations could be prepared by a suitable central body (the Money and Pensions Service perhaps) but in a template format, which can be completed with specific company and scheme information and then delivered face-to-face at a local company level by the ‘representatives'.
We might also note that a recent paper from Broadridge and The Center for Generational Kinetics - Decoding the Millennial Mindset - showed that millennials, generation X and baby boomers all preferred in-person face-to-face pension comms over any other method. Use of social media, by the way, for this was the least preferred method for all segments!
MNRs, as I suggest, would also form a ready channel for communication and feedback to the master trusts used. They might also address such issues as encouraging members to use web services, improving member data including email addresses, expressions of wish nominations, and so forth. They could also seed the two-way channel regarding ESG beliefs or other ethical interests.
To me this would be a logical and beneficial development step for member nominees. And, as PP extols, it could foster better cognizance of the socioeconomic circumstances faced by the diverse member cohorts.
Barry Parr is an independent master trust trustee, and a former founding co-chair of the Association of Member Nominated-Trustees
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