Dalriada News

Greig McGuinness

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What is a Professional Pensions Trustee?

I was given the brief of writing a short piece to give potential and new recruits a flavour for what we do.  Thankfully the Pensions Regulator (“TPR”) and the Association of Professional Pension Trustees have helped to define in recent years what we are but, especially in the Dalriada universe, what we do might be a little harder.

Back in 2017 I wrote a blog regarding TPR’s [then] new Professional Trustee Description Policy which defined the difference between a professional and lay pension trustee and how TPR would treat them differently i.e. hold professionals to a higher standard of care and give them bigger fines if the fell short of that standard.  As far as TPR are concerned, a Professional Pension Trustee is any person, whether or not incorporated, who acts as a trustee of a scheme ‘in the course of the business of being a trustee’. However:

A person would not normally be considered to be a remunerated trustee acting as a trustee of the scheme in the course of the business of being a trustee if:

a) they are or have been:

• a member of the pension scheme or a related pension scheme (ie a scheme with a sponsoring employer in the same corporategroup1); or

• employed by, or a director of, a participating employer in the pension scheme (or an employer in the same corporate group); and

b) they do not act, or offer to act, as a trustee in relation to any unrelated scheme.Where an individual represents or promotes themselves to the trustees or sponsors of one or more unrelated schemes (ie schemes in relation to which the individual does not meet either of the descriptions in (a) above) as having expertise in trustee matters generally (rather than just in certain areas), whether for remuneration or otherwise, they would normally be considered to be acting in the course of the business of being a trustee.

Where an individual represents or promotes themselves to the trustees or sponsors of one or more unrelated schemes (ie schemes in relation to which the individual does not meet either of the descriptions in (a) above) as having expertise in trustee matters generally (rather than just in certain areas), whether for remuneration or otherwise, they would normally be considered to be acting in the course of the business of being a trustee.

Following this, and as part of TPR’s 21st Century Trustee campaign, there was much debate and consultation of what “Professional” should  really mean beyond the basic definition of being paid in the course of business and not maintaining their amateur status to trustee in the Olympics.  The Pensions Trustee Standards Working Group was formed (primarily a joint venture between the APPT, the Pensions Management Institute and, TPR) to create a professional code for Professional Pension Trustees.  Up until now there has been no barriers to entry to the “profession”, no accreditation framework, no defined standards as to what an employer, a co-trustee, a member could expect from someone selling their wares as a professional trustee.  For the first time, in March 2019, we have these.  The Profession has come of age, standards have been published and backed by TPR and an accreditation framework has been developed by the APPT, in conjunction with the Pensions Management Institute, to be launched in the summer.  Charlatans and cowboys beware!

Now the professional standards and  accreditation framework are very much in their infancy and they will doubtless evolve through time, but effectively:

“Professional trustees must meet the requirements imposed on any pension scheme trustee by general trust and pensions law, the Trust Deed and Rules of the scheme as well as the expectations set out in relevant codes of practice issued by TPR.

Professional trustees must bring specialist pensions capability to the board, including:

(a) A thorough understanding of the key issues facing pension schemes, and how to address these effectively.

(b) Good practice on governance matters and effective risk management.

(c) An ability to examine issues objectively and impartially, and to question advice appropriately.

(d) Insight into the market for services to pension schemes.”

The accreditation framework requires Professional Pension Trustees to demonstrate that they are Fit and Proper, apply Expertise and Care and maintain a sufficient level of Knowledge and Understanding.

So that is pretty much what we are but what do we do?

In a nutshell, we act independently and without bias to ensure that the right people, get the right benefits at the right time.  In practice we are responsible for the investment of millions, tens of millions, hundreds of million, billions of pounds of other people’s money with the goal of providing a promised retirement income.  We are responsible for the executive management of a cost centre with an annual budget of tens if not hundreds of thousands of pounds.  We negotiate with sponsors on funding decisions, have a key role in corporate restructuring and are legally responsible for protecting member’s rights. We work with other pensions professionals, TPR, the Pension Protection Fund and, even the police sometimes.  Trustees have to understand the whole landscape within which their scheme fits but do not have to be an expert in any particular field.  We are general practitioners and have specialists at our finger tips – the skill is knowing how and when to use them.

The role of the trustee is essential to the running of most work-based pension schemes, the job has in many cases grown beyond the abilities of the part time amateur and, whilst there have always been good professionals, we now have the green shoots of a Profession worthy of the name.  A Profession that I for one find very rewarding and would recommend to anyone who cares about protecting members’ benefits – and can pass the new accreditation standards!