Any other business: Whitehall braced itself for a further 100,000 job losses over the next five years, as the new government announced cost-cutting measures across the civil service this week.
George Osborne aims to squeeze savings of £10bn out of Whitehall by 2017-18 to keep the Tory promise of eliminating the deficit by 2018 on track.
In this age of austerity, pension scheme trustees may find themselves fighting an uphill battle against ever-rising costs.
Scrutiny on scheme charges, administration and advisory costs reached an all-time peak back in April, when revisions to defined contribution governance in code of practice 13 came into force.
Debate around the somewhat intractable concept of 'value for money' and the even harder to pin down 'good member outcome' present trustees with a very difficult challenge: namely, to drive down costs while safeguarding the delivery of optimal retirement income to members.
Roger Mattingly, director at independent trustee company Pan Trustees, said schemes must put a structure in place to challenge costs. Pan Trustees is currently working with schemes to implement ongoing cost-tracking systems.
“[We’re] also challenging advisers to prove their worth, to tell me and my fellow trustees how they’re adding value,” said Mattingly.
There is a huge debate about what value for money is and what it means – it’s such a difficult blend of objectivity and subjectivity
Roger Mattingly, Pan Trustees
“It’s a case of value for money and what you’re getting for that.
“There is a huge debate about what value for money is and what it means – it’s such a difficult blend of objectivity and subjectivity.”
Mattingly said trustees should think about quality, cost, risk and relevance when considering whether a proposition is good value.
Lead on decisions
Amid such complex value for money considerations, trustees may become overly reliant on advisers to lead the decision-making.
Adrian Kennett, director at independent trustee company Dalriada Trustees, said trustees must set the direction for advisers and hold them to account in order to keep costs on track.
He said advisers may have conflicts of interest tied up in offerings from other branches of their company, and present a raft of products and options that are unsuitable for schemes’ specific circumstances.
“If you’re being blinded to follow a path, you need to stand back and say I don’t understand,” he said.
“The [Pensions] Regulator wants trustees to challenge their advisers, to be equipped with a certain level of knowledge [and] familiar with the issues,” he added.
However, Kennett said it was also important to be reasonable with advisers during periods of review, and conduct open and honest discussions about schemes' cost considerations.
“The lowest price is not always the most efficient price,” said Kennett. “You want a range of advisers that are appropriate to the type and nature of the scheme that you have.”
Key attendees
Consultants, actuaries and lawyers may attend quarterly meetings to stay abreast of scheme developments but professional trustees questioned the need for a mass turnout from advisers.
Richard Butcher, managing director of professional trustee company PTL, said it was important to manage scheme advisers efficiently and that a bit of "canny chairmanship" could ensure that the correct people attend when required.
“You get any number of meetings where the scheme actuary turns up and sits all the way through, or the scheme lawyer turns up and you just don’t need them there,” said Butcher.
"I've also seen scheme lawyers and actuaries taking minutes, which is a ludicrously over-the-top way of doing it."
He added: "Any service provider and any adviser should have an allocated time when they should pitch up, say what they’ve got to say and leave again."
