Royal Mail and M&S trim trustees to reflect membership

The moves by two of the UK’s largest schemes follow similar restructuring by big pension schemes, including IBM, The Pensions Trust and American Express.

Royal Mail Pension Plan said there would be some cost reduction as a result of the new set-up but added that this was not the main reason for the move.

“This is not driven by cost savings – the money we’re talking about is not material,” said Gerry Degaute, chief executive of Royal Mail Pension Trustees.

“The membership profile changed dramatically from having lots of pensioners, lots of deferreds and lots of actives, to only having actives.”

RMPP was part-nationalised in April, with the government taking on assets and liabilities of the majority of the plan. This reduced RMPP’s assets from £30bn to £2.5bn.

The £4bn M&S scheme is in the process of reducing its trustee board from 12 to nine following its decision to replace its defined contribution section with Legal & General’s mastertrust in anticipation of auto-enrolment.

The retailer therefore needed a smaller trustee board because it is solely responsible for the company’s defined benefit scheme. It also closed its DC committee, one of its three main sub-committees.

Schemes that undergo a dramatic restructure can often find their trustees are no longer representative of their membership.

A change to the trustee board set-up can lead to more efficient governance and reduced costs.

The new structure will be in place from October 1.

Why RMPP shrank its board

Royal Mail has completed its reduction of the number of trustees on its board from 11 to nine to reflect the reduced number of members it is now responsible for.

I don’t feel we as trustees have any problem with the company wishing to make this decision

Jerry Degaute, RMPP

When the government part-nationalised the scheme in April, it took on the liabilities of all deferred and pensioner members, leaving RMPP with 121,000 active members.

Following this restructure, Royal Mail felt it was no longer appropriate to have a pensioner representative on the board, of which there was one.

It also decided to remove an employer-nominated trustee to ensure there was balance on the board.

“The trustee board will remain as always equally balanced between employee-nominated trustees and member-nominated trustees,” said Degaute.

As part of the restructure, Jane Newell will step down from her position as chair of both the DB and DC scheme.

She will be replaced as DB chair by Joanna Matthews, who is currently an independent trustee chair of the Electricity Supply Pension Scheme, Mirror Group Pension Scheme and Siemens Pensions. All three schemes have assets in excess of £2.5bn.

The new chair of the DC scheme, which has £50m in assets on behalf of the 15,000 members who joined after the closure of the DB scheme to new members in 2008, is yet to be announced.

The idea of restructuring the pension scheme in this way was pushed forward by the company but Degaute added: “I don’t feel we as trustees have any problem with the company wishing to make this decision.”

Why M&S restructured

Last August, schemeXpert.com reported on M&S opting for L&G's mastertrust vehicle to replace its existing DC section in preparation for auto-enrolment.

There is a trend of large schemes looking at their trustee board set-up and asking whether it is fit for purpose

Robin Simmons, Sackers

The change meant there were 11,000 fewer members of the M&S pension scheme and no need for a DC committee.

"This naturally led to a reappraisal of the board and committee structure and it was agreed between the company and trustees that the board size would be reduced from 12 to nine," said an M&S spokesperson.

"The reduction in numbers will take place with effect from October 1, in line with the expiry of scheduled periods of office of some trustee directors and with the loss of the one DC member on the board who was no longer eligible to stand."

The remaining board has an external chair and two independent trustees, as well as company and member representatives.

Robin Simmons, head of scheme governance at Sackers, who advises the RMPP, said: “There is a trend of large schemes looking at their trustee board set-up and asking whether it is fit for purpose.”

He added that smaller trustee boards could make schemes more “fleet of foot” in their decision making, and more detailed discussions often took place within sub committees, which large schemes were increasingly putting in place.

In January, schemeXpert.com reported on the IBM pension scheme, which reduced its board from 12 to nine trustees in May.

At the time, the scheme said it was looking to align with best practice in the industry and it hoped a reduced number of trustees would lead to more a more effective governance and decision-making process.

The Pensions Trust has also reduced its trustee board in recent years, from 16 to 13, but said this was not motivated by a drive to cut costs.

However, American Express Services Europe increased its number of trustees from eight to nine as it was required to have one third of trustees representing members.

According to the National Association of Pension Funds, pension scheme boards have an average of eight trustees.