A more confident approach could bring benefits
A recent report says a more confident approach from trustees could result in real innovative thinking. Helen Morrissey is inclined to agree.
Recent years have been characterised by a real focus on improving scheme governance. To be fair we have seen a lot of success in this area with the introduction of charge caps and investment governance committees as well as improved investment strategies.
However, a paper written by the 300 Club shows that we still have some way to go. According to the paper the responsibility of ensuring schemes pay out member benefits long term can weigh trustee boards down. With less support from sponsoring employers and a fear of making mistakes many boards can lapse into micro-management and risk aversion.
Trustees fear standing out from the crowd with an idea that might go wrong and so are unlikely to say anything. As a result there is over reliance on advisers and a move to herd-like behaviour.
According to the paper the responsibility of ensuring schemes pay out member benefits long term can weigh trustee boards down. With less support from sponsoring employers and a fear of making mistakes many boards can lapse into micro-management and risk aversion.
According to the paper trustees should run their pension scheme as they would a business. Such an approach would increase trustee confidence and give more leeway for innovative thinking. This is likely to play into the hands of lay trustees who may have run departments and teams as part of their day jobs and have valuable skills to offer.
In a world currently hamstrung by regulation and bureaucracy, such an approach seems like a breath of fresh air and I hope we will see more schemes adopt such an approach.
According to one of the report's authors we aren't light years away from being able to adopt such an approach - we just need to take the time to step back and take a long-term view of what the scheme needs. I hope it is a leap that many schemes are willing and able to take.
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