The Essential Guide to Trusteeship

Has a teenager ever woken up one morning with the blinding revelation that their role in life was to become a pension scheme trustee and help steer members and schemes through the troubled waters of retirement scheme planning, investment, good governance, financial prudence and all within meeting their fiduciary responsibilities (and before the days when you could Google, or is it Alphabet now, fiduciary)?  Not one?  What a surprise.  Most people become trustees because it develops as part of their job or because they are convinced that they can add value, skill and experience as a member nominated trustee.  But there’s a problem …

In my role as independent trustee, yes one of the people who do it as their job, I have managed numerous member nominated trustee exercises and I do feel disappointed when exercises conclude and the vacancy has not been filled. Why is this?

Whilst the role of any trustee, not just a member nominated trustee, is a demanding one due to the requirements to demonstrate that you have the necessary knowledge and understanding, it is also potentially a very rewarding role with huge potential for personal and professional development.

The member nominated trustee carries an equal voice and brings a member perspective to trustee Boards which may consist solely of employer nominated trustees.

Yes it’s a huge learning curve but the Pensions Regulator gives a new Trustee time. Time to undertake the Trustee Toolkit, the building blocks for a new trustee’s (and a few old trustee’s) knowledge.  Time to become conversant with the scheme documentation. A good place to start is the latest scheme accounts for an overview on the scheme assets and the funding position along with a summary of member numbers and movements. Time to understand the history of the Scheme.  Recent Trustees’ minutes will be a good introduction to current. Time to understand what the years ahead will look like and what has to be tackled.  A check of the scheme business plan will inform you of key dates, for example, when the next actuarial valuation is due or the next set of accounts.

So how do you get up to speed with your scheme?

Sitting down to read through your scheme’s Trust Deed and Rules along with any subsequent deeds of amendment and/or Trustee resolutions, may not be an appetising thought, however, it is vital to have a good understanding of what the scheme is providing to members (a benefit specification if available is a useful side document) and also gain a knowledge of your powers as trustees (some schemes have a balance of powers report so look out for that as a handy summary).

A good working knowledge of the benefits provided is the first task. You will also have to gain a knowledge of investments, funding and employer covenant and how they interact. There are a number of ways to gain this knowledge such as external courses and, as I have mentioned, the Pensions Regulators trustee toolkit. The real knowledge in these areas will be gained by on the job training. When your scheme’s next actuarial valuation is due use the process as a tool to further your knowledge on funding defined benefit scheme, similarly a wealth of knowledge will be gained when reviewing your investment strategy and assessing the covenant of the schemes principal employer. Take a record of this on the job training as the Pensions Regulator may well ask a trustee to provide evidence of its knowledge and understanding.

It’s a lot of work I grant you but should you be put off?  Not in the least.  A member nominated trustee has a strong voice and can make a difference to the running of the scheme.  For personal development it is excellent for learning new skills (and maybe using some old forgotten ones).  So every time you run an MNT exercise sell it as the positive experience that it really is.