Schemes with only professional trustees are better run, research from the Pensions Regulator has today suggested, but experts have said schemes should not overlook the value of their non-professional counterparts.
The role of non-professional trustee has come under fire in the past due to the lack of qualifications required to become what can be a key decision-maker on a pension scheme.
David Blake, director of the Pensions Institute at Cass Business School, has even previously said the role is not “suited to the modern world”.
How did the members do in the size of their pot? There’s no comparisons of those points. The comparisons made are a little abstract and arbitrary
Barry Parr, AMNT
The regulator’s ‘Trustee Landscape Quantitative Research’ comprised 816 conversations with trustees of defined benefit, defined contribution and hybrid schemes that had at least 12 members.
It found 46 per cent of schemes with only professional trustees spent 10 or more days on trustee duties each year, compared with 33 per cent of boards with only non-professionals.
The former also had better self-reported understanding of pensions law and ability to assess value for money in investments.
However, Barry Parr, committee chair of the Association of Member Nominated Trustees, said the research failed to take into account many of the benefits of lay trustees and did not cover member outcomes or communication.
“How did the members do in the size of their pot? There’s no comparisons of those points. The comparisons made are a little abstract and arbitrary,” he said.
He continued: “There are other qualities you could argue boards with a strong lay trustee contingent are strong in; communicating with members for example.”
AMNT analysis of its members suggested the vast majority of them are qualified professionals in their own fields, Parr said.
“They are extremely well-qualified in their own discipline and can take a wider view,” he said, adding that the most common profession among the association’s membership is pilot.
Lack of formal training
The research also found only half of non-professional trustees had undertaken formal, structured training in the past year.
However, this may be due to how formal training is defined, as the research said the trustee toolkit had been used by 71 per cent of boards in the past year, with 40 per cent receiving training through a legal adviser and 38 per cent receiving training in-house.
Michael Chatterton, director at professional trustee company Law Debenture, said: “For all our schemes we encourage all trustees to complete the toolkit shortly after becoming a trustee.”
He added: “The other point is, actually it might be a question of how it’s recorded.”
Chatterton said all well-run schemes would have schedules for just-in-time training before meetings or similar measures.
Parr echoed this. He said: “All the schemes I’ve been involved with ran training opportunistically alongside trustee meetings. We provide training sessions at the AMNT. I guess what they [lay trustees] might not do is record quite as rigorously.”
Large schemes, perhaps unsurprisingly, were found to have better governance than medium and small schemes, with 89 per cent holding meetings at least quarterly, compared with 48 per cent of medium schemes and 25 per cent of small schemes.
Those used for auto-enrolment also showed higher levels of governance, with more frequent meetings and formalised training in place for trustees.
Chatterton said: “It’s not surprising those schemes that are used for auto-enrolment and which are trust-based will have an employer who is more focused on the needs of the scheme.”
