Member-nominated trustees bring clear value to scheme boards, but it is important their knowledge is up to scratch, says David Fairs
We need to improve the standards of trusteeship and governance in pensions.
The evidence shows a vast gap between how smaller and larger schemes are run and it is not fair that savers in those smaller schemes get a worse service.
One of the areas The Pensions Regulator is looking at is ensuring trustees have the right knowledge and skills to carry out their role. Our Future of Trusteeship and Governance consultation asks if there should be a minimum level of understanding that trustees must demonstrate.
In our efforts to drive up governance standards and better protect savers, we have been accused of being too harsh on lay trustees, making the role unappealing and, ultimately, pushing lay trustees off boards.
But it's important to recognise that scheme members are entrusting trustees with their savings for later life. Most are absolutely going to depend on that money to live on and pay their bills through retirement. They have a right to expect that their scheme is being well run, that their money is being managed well and that they are not paying excessively for the services in that pension scheme.
As a trustee you have a tremendous responsibility. The way you govern the scheme - the way you operate - has a direct impact on the standard of living scheme members will have in retirement. With that tremendous responsibility comes an expectation that the skills and knowledge of trustees should be high. That's why we are exploring whether there should be a minimum standard of knowledge which trustees must demonstrate to ensure they are meeting their duties.
We're conscious that some schemes really struggle to encourage members to put themselves forward to be trustees. The right people with the right understanding can add a lot of value to trustee boards. I want to be really clear that we greatly value the contribution that member-nominated trustees bring.
But we need to get the balance right, encouraging people to come forward but also making them understand that they have a major responsibility and a duty to have the right level of understanding to deal with the issues that they will face.
In my experience, good trustees who are given a lot of help from trade unions act very knowledgably and provide great support to the scheme. We worry, though, when we hear from member-nominated trustees that they sit on boards solely to represent the views of savers in a pension scheme. That's not the case. All trustees represent savers. Although bringing the views of members to the board is clearly important, member-nominated trustees have tremendous responsibilities like every other trustee - ensuring that peoples' retirement funds are being responsibly looked after and appropriately managed.
It's important that every trustee has a good understanding of what their role entails and what their responsibilities are. We do not want to hinder the recruitment of trustees - to the contrary, in the consultation paper we explore how to encourage recruitment as well as diversity on boards. But it's also vitally important that trustees recognise their role on a board is more complex than just representing members' views.
How do we make sure that trustees get the training they need? One suggestion we've received through the consultation so far is mandatory training before taking up a trustee role. Another is that an obligation should be placed on employers running their own schemes to provide a budget for trustee training and ongoing development, as well as a time allowance within their day job for trustees who are also employees. We're really keen to consider all suggestions.
Find out more and respond to the consultation at www.tpr.gov.uk/trusteeship
David Fairs is executive director of regulatory policy, analysis and advice at The Pensions Regulator
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