That was the headline that caught my attention this week. It came out of a speech made by the Pensions Regulator chief executive Andrew Warwick-Thompson at the Pensions Age Autumn Conference on Friday 11 September and as reported in PensionAge.
As a professional Trustee my first thought was who? Me? I certainly hope not. Then I read in some more and the actual content of what Warwick-Thompson said was very interesting (and made me feel a bit better about my chosen career).
The Regulator has been undertaking some research into the trust based model and will be drip feeding the results to the industry throughout the year (keep us hungry I guess although I’m not sure why).
Based on their findings they have concerns that, in smaller schemes, trustees (and we are primarily talking lay trustees here) are likely to have less time to upskill for their role and to devote time to the job of being a trustee. So if you are a trustee in a large DB or DC scheme, it is expected that you are more likely to have the backing in time and training from your employer to make sure you have the skills to do the job. If you have a small DC scheme then this is unlikely to be the case, which has an impact on security for members and investment; the latter being something that many trustees struggle with (according to the drip feed of results).
One comment in particular stood out. Seemingly, Lesley Titcomb, the Regulators CEO, was shocked to find that there was no competence test for Trustees. (One might argue that identifying the need for one and the mechanics to put this on place sit foursquare with the Regulator in the first place.) Trustees must acquire the relevant Knowledge and Understanding, that’s the law. But the Regulator obviously has concerns that, for lay trustees in small Schemes, this is failing. The Regulator’s Trustee Toolkit is in place and is being added to all the time (new DC Investment modules having recently been added). However there is no compulsion to do this unless, like me, it is deemed necessary for a role as a Professional Trustee. How difficult would it be to have a register of all trustees (in more detail than from the Scheme returns) and at the very least make the Toolkit compulsory? It won’t bring TKU to 100% (we all know people who are good at passing exams but don’t do much more than this) but it’s a start.
With auto-enrolment there are likely to be more new small schemes being set up and more trustees who fall into the area of concern for the Regulator – perhaps that is a big driver for the research and the concerns. Unless the Regulator is going to push employers towards Master Trusts and contract based schemes (and it is a bit late in the day for that) then this is something they will have to address.
With my professional Trustee hat on a couple of other thoughts came to me.
I see a lot of schemes that are, to put it bluntly, scams. These were set up by “employers” and had “trustees” appointed. How many of those trustees met or continue to meet the knowledge and understanding requirements? Not many.
If trustees had to log their compliance with the knowledge and understanding regulations, would that weed out the unscrupulous? Perhaps a few would find the hassle too much and a few more would think twice if they understood their obligation better. Such a register of compliance might assist the Regulator in their efforts to stop scams provided they had ample resource to police and audit.
The second thought I had was perhaps less altruistic and possibly wishful thinking. With the increasing complexity of regulations, not to mention scams, it may only be a matter of time before the default for pension schemes is the inclusion of a Professional Trustee, unless the existing board can demonstrate that they are already suitable qualified and experienced.
Coming back to my original thought – who? me? I think I have concluded that Professional Trustees like us are not the problem but, could we be the answer?