Trustees must be member-focused, collaborative, and data-led to succeed in the new landscape heralded by the government’s legislative changes, according to the Pensions Regulator (TPR).
Speaking at the Pensions Management Institute’s annual conference yesterday (5 June), TPR chief executive Nausicaa Delfas identified five key traits of successful trustees, who she described as central to the pension system.
“With responsibility for the financial wellbeing of millions of people in the UK, trusteeship needs to come into line with other professions and corporate governance standards.”
Nausicaa Delfas, TPR
These traits are:
- Being focused on outcomes for savers and pension scheme members, including not only fiduciary duty but also other duties around administration, advice and investment.
- Being able to challenge constructively, incorporating diverse perspectives, scrutinising advice and managing conflicts of interest.
- Having the relevant skills and expertise, and continually ensuring that these remain relevant and up to date.
- Collaborating with providers and advisers while retaining oversight and accountability
- Using accurate and insightful data to inform decisions
To support trustees, Delfas said TPR would streamline its scheme return and supervisory returns “to rationalise and remove asks of you which aren’t directly related to good saver outcomes”. This would also allow the regulator to “focus our activity on where the greatest risk lies and let you focus on the task at hand – delivering for savers”, she said.
Other measures TPR is taking include improving data quality and transparency across the industry, and collaborating closely with the government on the incoming reforms to ensure a joined-up approach.
What TPR wants from trustees
Delfas explained that trustees of defined contribution (DC) default funds in particular required strong, skilled trustee boards to ensure these offerings remained appropriate for members.
“I want all trustees to display a genuine understanding of what the right balance of risk and reward is for their type of member, and their type of scheme,” Delfas said.
“We all know investment decisions are not risk-free. Therefore, they must be the product of informed decision-making based on good governance with a view to the best financial interests of members…
“We want to see clearly defined objectives for savers which trustees regularly review by considering the likelihood of achieving those objectives through a comparison of real-world performance with forecasted models, and then adjusting their strategies.”
“[Investment decisions] must be the product of informed decision-making based on good governance with a view to the best financial interests of members.”
Nausicaa Delfas, TPR
TPR has already outlined its plans to engage closely with master trusts with “expert to expert” meetings to understand investment strategies and processes.
Delfas also reiterated the importance of challenge and the management of conflicts of interest concerning professional trustees.
“While we welcome the skills and expertise brought by professional trustees, we must also ensure that any conflicts are managed and that decisions are always made purely in the interests of savers,” she said.
Delfas added: “Member-nominated trustees, often supported by trade unions, or committees help bring that all-important view from members to decision-making. We need to build on this and go further in terms of ensuring good governance at trustee boards.”
The chief executive emphasised that the whole industry needed to “adapt and evolve” to meet the requirements of the Pension Schemes Bill.
“We don’t need to reinvent the wheel,” Delfas said. “After all, pensions are operating in a mature financial system.
“But with responsibility for the financial wellbeing of millions of people in the UK, trusteeship needs to come into line with other professions and corporate governance standards. Learning from others and applying the best of analogous regimes within our own regulatory sphere of influence must be the goal.”
