Lewis Brown of the Association of Member-Nominated Trustees highlights the need to balance professionalism with the lived experience of members, as the government explores ways to raise standards of pension scheme governance.
Often when asked to look forwards, I find myself looking backwards, seeking guidance in the precedent of the past.
Three obols a day was the going rate for a juror in ancient Athens, a tidy daily sum for those too old to labour in the Mediterranean sun. Yet those small coins were not the only reward received, as the aged Philocleon makes clear in Aristophanes’ The Wasps, when he asks whether there is any creature alive that is happier or more fortunate than a juror.
Satire aside, the value of wider participation in matters of civic oversight was well recognised in Athens, and, importantly, that participation was open to those outside of the ruling classes.
It’s easy to stretch this analogy and see trustees within pension governance currently fulfilling the same kind of civic duty, driven by the need to ensure correct stewardship of their members’ deferred pay. Trustees sit at the crossroads of employees, members, suppliers, and markets, responsible for delivering intergenerational promises across literal lifetimes.
I may be biased when I say this, but I think modern trusteeship within pensions is probably the most consequential voluntary governance role one could hold within the UK.
Keeping up with the pace of change
But no time to rest on laurels, dear reader! The continental drift-style cadence of pensions landscape change has been replaced by a veritable landslide.
Scheme consolidation and the ongoing growth of the professional trustee community offer the backdrop, while the Department for Work and Pensions’ current look at professional standards, governance and administration acts as the players. Waiting in the wings is Torsten Bell’s promised statutory guidance on how to juggle fiduciary duty with consideration of systemic risk. High in the box, the Pensions Regulator peers down, making notes on how best to scrutinise administrators. What a show.
The stage directions are clear: higher standards are expected, better practice embedded throughout and more transparent and less conflicted lines of accountability. In other words, embedding professionalisation.
Trustees will be expected to demonstrate higher levels of minimum knowledge standards as well as act as experts in risk management. Carbon literacy and appreciation of emissions are already requirements. Trustees will also need to be expert negotiators, supplier managers, financially literate, and have the ability to flex between all of these at a moment’s notice.
Phew, what a list, and it’s not even half-exhaustive!
“We must all work together to identify and deploy appropriate mechanisms to ensure that not only are member voices heard, but they continue to be directly represented.”
Lewis Brown, AMNT
We can also see that trustees will become a rarer kind of beast; ongoing consolidation will continue to strip away the number of trustee positions required, as will the existence of other governance options that schemes may show a preference towards.
Greater self-selection pressures will also exist, especially in the member-nominated space. The bells of accreditation are tolling in the background, and all of these knowledge and skill requirements place ever greater pressures on those trustees also working in full-time roles.
For those incoming lay trustees not put off by all of this, that first year of learning in the future will certainly feel like a packed rollercoaster of a ride. And they need to be supported in their efforts, as the voice of the member must continue to be heard at board level.
Balancing professionalism and lived experience
While we await the aforementioned statutory guidance on fiduciary duty, trustees can see the need to evolve their understanding of that duty in the context of modern-day trusteeship.
Those liabilities always need to be paid, of course, and that must always be central in our decision-making. But a more nuanced ability in considering long-term systemic risks such as climate change, while articulating how factors such as geopolitical volatility and market concentration risk are key considerations in decision-making processes, will better equip trustees to undertake the long-term systemic thinking that will be required to ensure delivery of promised member benefits in the decades to come.
And what better to match that updated understanding than with the lived experience that member-nominated trustees bring? While we think the future will better professionalise trustees, it cannot be allowed to make professionals of them all.
Yes, that bar of standards will be raised, and closer scrutiny of trustee competency can only lead to better outcomes for all, but we shouldn’t be aiming to deliver homogenisation of views alongside that competence. Good governance requires direct representation and accountability, and member-nominated trustees best embody that link between any scheme and its members.
We will all have to work harder in the future to provide that direct representation. Master trusts, superfunds, and ongoing consolidation of defined benefit schemes have all worked to centralise governance – and yet the preservation of the member voice has sometimes felt like a secondary concern throughout.
Raising standards to benefit all
As schemes continue to grow larger and governance is ‘professionalised’, we must all work together to identify and deploy appropriate mechanisms to ensure that not only are member voices heard, but they continue to be directly represented.
Those three obols a day were a small price to pay when the result was to embed ordinary citizens within their civic decision-making processes. And fortunately, unlike in The Wasps, there doesn’t seem to be a Bdelycleon trying to chase our Philocleon out of active participation.
Trusteeship will see changes incoming that will raise standards and give employers and members better confidence that their own futures are better safeguarded. That is a good thing.
But the principle that those whose futures are at stake should continue to have a seat at the decision-making table is, in my opinion, central to the debate. Let us not forget the very reason for the existence of member-nominated trustees and the scandalous behaviour that led to their introduction.
Lewis Brown is a committee member at the Association of Member-Nominated Trustees.
