In Depth: Trustee support and other key talking points from the government’s WPC response

The plans are contained in a 29-page document published last week by the government in response to the Work and Pensions Committee’s defined benefit (DB) pension schemes enquiry.  

The committee’s report was written and published under the previous government. 

The government said it intended to consult on the “framework of accreditation and governance” later this year, and also on “measures to improve governance of trust-based schemes”.

“Those lay trustees who are unable to meet the required standard are usually poorly supported by the scheme sponsor.”

Government response to Work and Pensions Committee enquiry

On lay trustees, the government said their support systems are often dependent on the pension scheme’s sponsoring employer.  

“Some receive extensive support in the form of access to qualifications, ongoing trustee education and sufficient time away from their everyday role to maintain and develop their skills as trustees,” the response stated.  

“Those lay trustees who are unable to meet the required standard are usually poorly supported by the scheme sponsor.” 

The government also intimated that smaller pension schemes overseen only by lay trustees could be “less likely to meet the requirements expected of them and may require more support to fulfil their obligations”. 

The response also pointed out that the Pensions Regulator (TPR) was reshaping its supervision functions “to facilitate more direct engagement with trustees on an expert-to-expert basis”. 

Trustees ‘vital to member protection’

Helen Forrest Hall, chief strategy officer at the Pensions Management Institute (PMI), said: “In a world of increasingly large and complex pension schemes it is only right that the sector considers the required knowledge and capabilities of those safeguarding the pensions of millions of members. 

“The PMI has been working hard with the industry to drive up standards and further develop our education offering for trustees and we look forward to engaging with the Government on this important work.”

“The present government is having to stand all the arguments rehearsed over [the past 20 years] on their head to get scheme trustees to accept that all derisking must now stop.”

John Flynn, Association of Member Nominated Trustees

John Flynn, co-chair of the Association of Member Nominated Trustees, welcomed the government’s plan to consult on financial and time support for lay trustees. 

“Member-nominated trustees are a vital part of the member protection safeguard and as an association we will continue to work with government and TPR to ensure that these protections are not in any way undermined,” Flynn said. 

However, Flynn contended that the government was seeking to undo “20 years of risk reduction policies and packages” because of a perceived negative effect on the UK economy. 

“The present government is having to stand all the arguments rehearsed over this period on their head to get scheme trustees to accept that all derisking must now stop,” Flynn said. 

Endgames, surplus release and indexation 

The committee’s report had 23 separate recommendations covering a wide range of subjects. 

Many of these have already been addressed or expected to be covered by the government’s ongoing work, including the Pensions Review and the Pension Schemes Bill. 

After the Work and Pensions Committee highlighted discrepancies between DB aggregate funding data published by TPR, the Pension Protection Fund (PPF) and the Office for National Statistics, the three entities have been working to improve the consistency of published information (Recommendation 1). 

Recommendations 6, 7 and 8 related to DB pension scheme endgame options, particularly regarding support for schemes that choose to run on and maintain a surplus. 

The government said it would address these issues in its response to the ‘Options for Defined Benefit Schemes’ consultation later this year. It has already indicated that it plans to support surplus release options. 

Recommendations 9 and 10 relate to discretionary increases to benefits accrued before April 1997. The Department for Work and Pensions is set to engage with TPR about how schemes handle pre-1997 benefit increases, as Pensions Expert reported last week. 

UK investment, superfunds and the PPF

Superfunds and consolidation also featured heavily in the government’s response to the Work and Pensions Committee.  

In response to Recommendation 11, regarding encouraging a supportive environment for UK investment, the government cited superfunds legislation – slated for inclusion in the Pension Schemes Bill – that it said would “support the consolidation of DB schemes, helping to increase opportunities for investment in UK businesses and improving member security”. 

Related to this, the Work and Pensions Committee had also raised the prospect of the PPF as a consolidator alongside its role protecting pension schemes when their employers go bust. 

However, the government said it was exploring whether a “small, focused government consolidator, run by the PPF, could be an option for schemes less attractive to commercial providers”. The ‘Options for Defined Benefit Schemes’ consultation response would shape the government’s stance on this, it said. 

A spokesperson for the PPF said it welcomed “the government’s recognition of the role the PPF could play delivering DB consolidation”, and said it would “continue to engage and support government in their consideration of this”.

Finally, the government said it had “no plans” to pay redress to members of the AEAT Pension Scheme. This was despite the committee’s call for action after members of the scheme had lost out when the sponsoring employer, AEA Technology, went bust and the scheme transferred to the PPF. 

AEA Technology was previously publicly owned by was privatised in 1996. As a result, members who transferred to the privatised company’s pension scheme are typically worse off than they would have been if they had stayed in the public sector scheme.