Professional trustee standards created to encourage better practices

The Professional Trustee Standards Working Group published recognised standards and accreditation requirements for professional board members in February, with the backing of the Pensions Regulator.

To discourage poor practices in the market, trustees will have to show that they are fit and proper, have good governance skills and can manage conflicts of interest. They will also have to show they are undertaking ongoing professional development.

I have absolutely no problem in suggesting that professional trustees should have a relevant professional qualification. But the standards need to be much tougher

Richard Butcher, PTL

The Association of Professional Pension Trustees, which promotes the role of professional trustees, will be responsible for maintaining standards and overseeing the accreditation framework, which will be run by the Pensions Management Institute. The new standards are expected to take effect from July this year.

To hold accreditation, professional trustees will have to pass an initial application plus ongoing tests.

Managing a defined benefit scheme is becoming ever more complicated and requires the increasing use of professional trustees. According to a survey by RSM, an audit, tax and consulting firm, 70 per cent of pensions professionals believe lay trustees on pension scheme boards are at risk of becoming extinct over the next 10 years.

Standards aim to eradicate poor practice

Compared to lay trustees, professionals are expected to have a higher level of expertise, knowledge and skillset.

Tim Middleton, a technical consultant at the PMI, said the formal definition of what constitutes a professional trustee would help the regulator “to raise standards among trustees and improve the way that pension schemes are managed”.

Mr Middleton added that better standards would help eliminate cases like the recent transfer of more than £280,000 out of a pension scheme by a Lancashire accountant acting as a trustee.

“Anybody who appoints a professional trustee will get a credible professional doing the role; that is what the professional standards have been set out to achieve,” he said.

Richard Butcher, managing director of professional trustee company PTL, said this is a good start, but that he does not think they are stringent enough.

“I have absolutely no problem in suggesting that professional trustees should have a relevant professional qualification. But the standards need to be much tougher, whether that is a PMI qualification, an actuary, lawyer or some other sort of relevant qualification.”

Mr Butcher said the exams have to be more than just a tick-box multiple choice exercise.

Concerns over narrow qualification set

Other experts have appealed for a broader range of qualifications to count towards accreditation.

Naomi L’Estrange, managing director at 2020 Trustees, said: “The proposal, for the time being, is very much fixed on PMI qualifications and does not take into account other professional qualifications or continuing professional development requirements such as actuarial or legal, which actually might be more rigorous than the PMI requirements.”

Ms L’Estrange stressed that having professional qualifications and accreditation would improve the industry, but that previous qualifications within other professions with rigorous criteria ought to be recognised in some way.

She also questioned who will check that the process is good value for money.

The total cost of accreditation will be somewhere between £500 and £1,000, which according to the PMI will be comparable with the cost of other professional accreditation bodies.

The PMI said there is no other organisation that provides qualifications and meets the needs of pension professionals to support the ever-increasing pressures on trustees.