Buchanan: Lay trustees play an often unenviable but critical role

There is now more than enough law to keep even the most diligent lawyer fully occupied.   

This increased complexity has impacted on the role of pension trustees too.  

Gone are the days when being a trustee meant turning up to four meetings a year to discuss the fund's investment performance and to be told by the actuary every three years what level of employer contribution was needed. 

Today's pension scheme trustees are expected and required to take a far more active role in the management of their schemes, be they defined benefit, defined contribution or hybrid arrangements.   

This increased focus on the role has led some to question whether there is still a role for the unqualified, lay trustee – can they really understand such a complex technical subject?   

Lay trustees never lose sight of their duties to the members and the need to be able to explain their actions when they bump into their colleagues in the supermarket

But I am a great believer in the importance of the role of the lay trustee. During my years in practice I have rarely met a lay trustee that did not give great care and attention to the running of their scheme, willingly giving the considerable time needed to understand complex issues and prepare for meetings.   

The few lay trustees that I have encountered who fell short tended to be directors of the sponsoring employer who perhaps saw trusteeship more as a chore and perhaps, wrongly, viewed their role as being to protect the employer's interest.   

Case in point

Testament to my observations can be found in the paucity of High Court and pension ombudsman cases, where trustees have been held personally liable for failure in their fiduciary duties.  

It is telling that perhaps the most blatant case of a dishonest breach of trust involved GP Noble, a professional trustee firm that decided it would be a good idea to invest £50m of pension scheme assets in a new Virgin Island investment company with the initials MUFF.  

GP Noble was the sole trustee of those schemes. I doubt whether the proposed investment would have got past a lay trustee had there been any around.  

This is not to say that there is no role for professional trustees – far from it. Most of my client trustee bodies now include a professional trustee who sits alongside the lay trustees.  

This arrangement works very well in practice as the skills of the professional complement the down-to-earth inquisitiveness and business knowledge of lay trustees. 

As an adviser I welcome the challenging questions posed by enthusiastic lay trustees – they are often the most difficult to answer as it requires an ability to turn complexity into something that is understandable by the client.  

But most of all, lay trustees never lose sight of their duties to the members and the need to be able to explain their actions when they bump into their colleagues in the supermarket.  

This is the human element which first attracted me to pensions and long may it continue.     

Duncan Buchanan is president of the Society of Pension Professionals and partner at law firm Hogan Lovells