Whatever 2024 brings, trustees must stay on their guard and remember their primary purpose, writes Janice Turner of the Association of Member Nominated Trustees.
I was recently asked what I thought the biggest challenge for trustees would be in 2024. My initial response was “where shall I start?!”, as the ever-changing regulatory and investment environment continues to impact our schemes and the upcoming general election throws further uncertainty into the mix.
However, as I have to start somewhere, I would say that the biggest challenge for trustees is likely to bereviewing their strategic plans for investment and endgame in the light ofthe potentially re-re-revised Funding Code.
Interestingly, there is much discussion and ideas are emerging about how to support running on rather than buying out, to benefit both sponsors and members. This would require various levels of insurance against future market reversals through sponsor covenant insurance, longevity insurance, and possibly enhanced PPF support in return for an increased levy.
And most importantly – much thought needs to be given on whether it still makes sense for members once this various cocktail of options works itself through - or indeed whether there will be a choice and the buy-out market will be able to cope with volumes anyway!
There is not much in life that is certain, but one certainty is that there will be a general election in the next 12 months. So, we need to factor a potential/likely change of government into the mix. Whenever it does come, the consensus is currently that the Labour Party will form the next government.
Whichever party forms the next administration, my hunch is that in the short term we will probably see very little change to the current direction. With luck we might see more parliamentary focus on pensions with a Pensions Bill and, if we are really fortunate, there might be a greater emphasis on encouraging the speedy establishment of multi-employer collective defined contribution schemes.
The Government Actuary has concluded that for the same contribution, a CDC scheme would provide at least a 30% bigger pension than an ordinary defined contribution scheme. This could transform the retirements of millions of people and allow strategic investment in growth assets if that remains a priority of the new government.
Additionally, we would like to see AMNT’s long held calls for greater support for trustees, which we recently set out again in a comprehensive set of proposals discussed with the DWP, progressed by a new administration.
In essence, there need to be legal minimums of the amount of time away from work duties to carry out our work as trustees including preparation for meetings and undertaking training. Also there should be a requirement on pension schemes and scheme sponsors to encourage and pay for training and exams such as those for PMI trustee accreditation.
Governments need to remember that the primary role of trustees is the protection of members’ interests. Where these interests can coincide with helping the UK economy through new investment products etc, there is a win for both parties.
Other potential government proposals that would make a substantial difference to returns for pension members would include: reform of actuarial valuation methods; a change of policy to encourage DB schemes to remain open and the re-establishing of tax relief on UK dividends.
And if the next government were to be truly radical, they would ensure millions of self-employed and freelance workers could also access these schemes.
2024 is the Chinese year of the dragon, which is described as enthusiastic, intelligent, lively, energetic and innovative. Let’s hope the next government, whatever its colour, is all these things.
Let’s hope that it understands the need to provide an environment in which pension schemes can flourish so that working people can retire on an income that allows them to live a comfortable life. And, let’s hope that 2024 will bring positive change and new momentum.
But trustees – and member nominated trustees in particular - must forever be on their guard to ensure that whatever comes down the line, they protect the interests of their members and work colleagues. That is why they are there. And that is why there continues to be a need for people on a trustee board whose only interest is the wellbeing of members.
Janice Turner is the founding co-chair of the Association of Member-Nominated Trustees, and a member-nominated trustee of the BECTU Staff Retirement Scheme.
