On the go: The number of defined benefit schemes with a professional trustee on its board has increased by 60 per cent in five years, with a third of pension funds now using these services, according to LCP.
According to data obtained from the Pensions Regulator through a Freedom of Information request, 32 per cent of DB schemes used a professional trustee company in 2020-21, which compares with 20.1 per cent in 2015-16.
This means one in three DB schemes now use a professional trustee company, while in 2015 only one in five pension funds used these services.
LCP stated that the rise was due to the increased complexity and weight of new regulation, requirements and guidance on DB schemes, in which a “professional trustee with a wide experience of other schemes and a deep knowledge can add value within a board”.
The consultancy also noted that new rules in the Pensions Schemes Act 2021 around potential criminal sanctions imposed by TPR may motivate many more schemes to use specialists to help them navigate this complexity.
Other reasons for the rise of these appointments is that there has been a decline in the number of member-nominated trustees putting themselves forward to be nominated
Furthermore, LCP noted there is less appetite for senior corporate individuals to act as a trustee, particularly in the light of the possible conflicts of interest that this might create.
LCP stated that professional corporate sole trustee arrangements, where schemes effectively contract out trustee board duties, are also becoming increasingly popular.
As reported by Pensions Expert in April, research from Isio, which analysed 12 major trustee companies and 260 independent trustees, showed that 50 per cent of schemes had at least one professional trustee.
A further 41 per cent of appointments were for a trustee chair, while one-third of trustee appointments were for a sole trustee.
Nathalie Sims, partner at LCP, noted that ”increased regulation and the need for efficiencies, partly driven by corporate pressures, are playing a big part in the rise of professional trustees”, and particularly with the professional sole corporate trustee, which she noted will revolutionise the trustee sector.
She said: “Streamlining governance, reducing complexity and introducing an additional layer of professionalism given the increase in regulation are all some of the benefits.
“We encourage boards to ensure they familiarise themselves with the variety of firms, individuals and mix of skill sets when appointing a professional trustee who can provide an independent voice and additional perspective.”
