There are around 6,000 defined benefit (DB) pension schemes in the UK. Some are very big (the BT Pension Scheme has assets of £40bn and 300,000 members) and some are very small (less than £1m with just a handful of members). Looking after all these scheme are pension trustees. If these schemes have an average of 5 trustees each then my basic maths leads me to conclude that there are some 30,000 pension trustees in the UK. The Pension Regulator has the unenviable task of making sure these all trustees are up to the job of running the schemes, looking after the finances and making sure their members get the benefits they have been promised.
So who are the trustees running our pension schemes. Some more googling and I found out the following:
- There are around 200 professional pension trustees in the UK. These are people and firms who act as pension trustees full-time and are paid for this work. They are independent of both the scheme sponsor and the members.
- There are around 800 independent trustees in the UK. They generally have good pensions knowledge and experience but are not being paid or their services. They are not directly connected to the scheme sponsor or members (although some have previously worked for the sponsor).
- The rest are lay trustees.
So the overwhelming majority of trustees are lay trustees.
The lay trustees running our pension schemes usually have a normal day job and carry out their pension scheme duties on top of everything else they do. We should all appreciate this work as it is not easy running a pension scheme, keeping up with legislative changes, seeking funding for the scheme, complying with the Regulator’s requirements, investing the assets appropriately and making sure members are getting their pensions. Unfortunately, some are not keeping up – not because they do not want to but just because it is physically impossible for them to do so.
The Pensions Regulator is in a difficult position. It is responsible for making sure all trustees (including lay trustees) are suitably equipped to perform their roles and actually do perform their roles. At the same time the Regulator is being lobbied by big and small business saying that their businesses are unduly being influenced by the whims of the pensions schemes that are the being run by lay trustees. Many of these businesses claim that they spend too much time dealing with the pension scheme and trustees instead of running their own business.
So how does the Regulator make sure all trustees are performing. The regulator already provides a lot of support for trustees with training and development and has a process of reviewing some of the decisions trustees make. But the training is voluntary and so the Regulator may need to make this compulsory. But will this scare people off and even if doesn’t will that be enough anyway? After all, as a lay trustee how can you fulfil your pensions’ duties when typically you attend just one meeting a quarter and spend all the time between meetings busy with your day job even if you have passed the Regulator’s training? In the meantime, the scheme’s funding position has suddenly got worse and the scheme sponsor has to unexpectedly put in more money. The sponsor does not think it is his fault extra money is needed but instead they blame the trustees.
To avoid this sort of problem, trustees need to spend more time being trustees and the Regulator has to meet the challenge of raising standards of pension scheme trusteeship. This means that, for lay trustees, the burden may be about to become even greater.