There are many and varied reasons why the appointment of pension trustees makes very good sense. Certainly, the ever-growing complexities and regulations involved in the administration of occupational pension schemes nowadays is surely one of them. Most pensions observers would perhaps say it’s the main reason for their increased profile in recent years. Be that as it may, trustee professionals are here to stay, no matter the point of view expressed, and pension boards up and down the land are benefiting.
But perhaps more importantly, pension scheme members and employers, too, are better off as a consequence, enjoying a level of benefits protection or guidance and advice hardly imagined only a relatively short time ago.
So what should a trustee board expect from such independent trustees? For starters, excellent communication skills. That’s almost a given, especially when it comes to explaining matters to fellow trustees! Good negotiation skills are highly desirable, too, not to mention extremely useful when potentially complex problems, such as conflicts of interest, for example, are identified. These will have to be firmly addressed, often requiring to be handled in a timely and sensitive manner through discussions with board members, the employer or any advisers to the trustee board.
In such matters, experience will likely play a vital role, which is another crucial element to be considered when appointing any professional trustee. What level of experience have they had? Have they worked with other schemes before, both large and small? Have they worked with ongoing schemes, closed schemes, schemes going through wind-up or undergoing PPF assessment? These are just some of the many questions to be asked before inviting an outside trustee onto the board to augment its strength and depth, which surely is the raison d’etre for doing so.
However, there are a number of scenarios where the board may not have any choice in the matter. The courts, for example, can appoint a trustee, as can The Pensions Regulator under certain circumstances, such as where there is a need to protect member benefits because of employer insolvency.
The Pensions Regulator uses its trustee register to make such appointments. The register is open to all trustees, whether sole trader or corporate entity, and joining is neither compulsory nor an endorsement by the regulator of the services offered by a trustee or of their professionalism or competence.
In a sense, this underlines the consistent message hammered home by the regulator, and by other bodies, too. All trustees, whether independent, or otherwise, are personally liable for any consequences arising out of the decisions they might make. Although a trustee board may aim to improve its administration and strengthen its competence in order to better protect pension scheme members, using the services of a professional does not absolve individual board members of their responsibilities or duties.
So by all means, use the professional for the knowledge, expertise and experience which they are likely to bring to the table. The trustee board should certainly benefit in terms of added strength and depth of knowledge. However, don’t then just sit back and become less involved. Otherwise, leaving everything in the hands of the professional could turn out to be much more costlier than expected.