Does Saudi Arabia's succession planning put your scheme to shame?

Following the death of its monarch King Abdullah, the leading angle on reports covering Saudi Arabia – at points eclipsing the manifest human rights issues in the world's biggest oil exporter – was how smoothly the succession was planned to ensure continuity.

Indeed, the new King Salman has named the next two monarchs in line.

The future leaders of a pension scheme governance team may be a little more difficult to predict.

But governance experts warn that pension schemes and employers are not putting enough thought into the replacement of their key staff.

Steve Delo, chief executive at professional trustee company Pan Trustees, said: “Probably not enough trust boards think about succession planning and how they manage themselves." 

Not enough trust boards think about succession planning and how they manage themselves

Steve Delo, Pan Trustees

Such problems can manifest as a lack of audit trail on decisions, a lack of consistency and speed in decisions, as well as complaints not being dealt with soon enough.

But there can also be a personal element that is lost in an abrupt change. 

Giles Payne, director at competing trustee provider HR Trustees, said: "You may well lose just the personal knowledge of how to work with people. It does take time to build that relationship up." 

Payne said one obvious protection for a scheme is an "overlap period" with the person coming into the role mirroring the incumbent. 

"Try not to have too much change going on at the same time for the scheme so that there is some consistency through it, avoiding a once-and-for-all change," he added. 

The longer the transition period, the better the transition, experts agreed. 

Monitoring risks

Schemes were urged to have any important role properly noted on the risk register, as well as ongoing monitoring of when the terms of those critical roles end, and having a deputy chair in place ready to step in. 

Nita Tinn, director at professional trustee company ITS, said ideally companies and schemes should be thinking at least six months ahead about any change in personnel.

"If you had it down as a goal and in a risk register... you have got a much better chance of both sides thinking about it," she said.

In terms of appointing a successor, Adrian Kennett, director at trustee provider Dalriada Trustees, said "a mixture of skills" was crucial.

"You have to identify what particular skills you have on your board and they need to be complementary. You need to identify what that particular individual is bringing," he said. 

Key to the succession is whether the scheme head is appointed by trustees or the company, where companies could be looking a little more at the budget rather than the skills on offer.

“Often while they will be all important to the trustee board, the corporate can sometimes put not as much value on that individual than the trustee would," said Delo. "There can be a tendency to appoint people of lower calibre."

Tinn said it should be a "collaborative process" between the employer and trustees when making any major appointment, to make sure the governance team is not simply presented with an individual who does not have the required aptitudes.  

"[I'm] not saying the trustees should choose, but they should be involved in the process," she said, with trustees being able to put forward the particular skills needed from the incoming head.