The Selex and AgustaWestland pension schemes have reformed their member-nominated trustee election processes to safeguard decision-making continuity for their beneficiaries.
Scheme managers are considering back-up trustees and longer terms to ensure continuity in the face of tougher governance challenges. But experts question whether longer terms might inhibit fresh thinking.
MNTs: the basics
Trust-based schemes are required by law to have at least one third of their board members nominated by scheme members.
This can be done either through election or selection from a pool of candidates.
Some schemes have MNTs representing different sections of the membership.
The two defined benefit schemes, whose sponsor is defence company Finmeccanica, have switched from three-year to six-year terms for their MNTs.
In Selex’s In Focus newsletter last month, it told members these terms will be overlapped. This is to avoid a total loss of member representatives, particularly in the middle of a triennial valuation, for example.
“It is [about] continuity,” said head of pensions Mike Nixon. “We were concerned that if half of our trustee board disappeared in one go, which is theoretically possible, it would be very disruptive.”
Though it has not yet faced the problem of 100 per cent turnover of these representatives, the changes target continuity and also seek to ensure the schemes get more benefit from the training they offer MNTs.
Nixon added: “In practice it has not been a problem, it is a future-proofing arrangement. It means that the time we invest in them will pay dividends.”
Fine-tuning MNT governance
But keeping board members around for longer tenures has its potential downsides. Anne Kershaw, associate director at Muse Advisory, said schemes should balance their desire for continuity with the need to get fresh faces around the table.
It is a bigger challenge getting people to be interested enough to commit to the role
“Trustee terms of office should not be too long,” she said. “I still think there should be an overriding limit on the amount of time someone can sit as a trustee.”
Schemes could take other routes to ensuring continuity, including training up reserve or shadow trustees, who are ready and able to step into a decision-making role if called upon.
Any term limits on MNTs should be equal with those upon their company-nominated counterparts, said Robin Bell, committee member at the Association of Member Nominated Trustees.
“They have the same job description and common aims... there should be no rules that only apply to one category,” he said, adding it was more of an issue to find enough MNTs to justify limits.
“It is a bigger challenge getting people to be interested enough to commit to the role,” Bell said.
Pádraig Floyd, a reserve trustee at the Pearson Pension Plan¹, said: "Having trustees up to speed is very important to the scheme." The scheme provides these representatives with introductory trusteeship and training, and encourages them to attend meetings.
Floyd added: "This is so reserve trustees are not only grounded in theory, but familiar with the actual work of the scheme and ready to contribute as soon as they are needed."
¹This scheme is provided by the owner of Pensions Week
