One in seven trustees think sponsor relationship needs work

The survey by consultancy Hymans Robertson found some trustees have a fragile relationship with their sponsors, with one in seven (14 per cent) saying they feel it needs to be improved.

However, the vast majority of those surveyed (80 per cent) did not feel improvement was needed. Where necessary, consultants have advised trustees and sponsors to have a more open dialogue and set common goals to improve the relationship.

The consultancy surveyed trustees from corporate defined benefit pension schemes with more than £50m assets under management. Barry Mack, partner and head of governance at Hymans, said it was a “mixed picture”.

He added: “A lot of trustees feel quite comfortable with their governance arrangements at the moment, but there were one or two challenges in there.”

Mark Hodgkinson, director at consultancy Muse Advisory, said he was surprised the proportion of trustees that said the relationship needed improvement was not higher.

“When we engage with trustees to review the quality of their governance and start talking them about what causes them difficulties and challenges… the working relationship [with the employer] and how the communication and consultation is conducted is very often a live issue,” he said.

Working together

The Pensions Regulator’s new DB code of practice, released earlier this month, said trustees and employers should work collaboratively on funding and implement an integrated approach to risk management, taking into account employer covenant, investment and funding.

Hodgkinson said the relationship worked well where there was linkage between the trustee board and senior management, adding: “Our recommendation is to try to strive to have some sort of talking shop.”

The survey showed half of respondents said it was a challenge to ensure the sponsor, trustees and advisers were working well together. One in three (31 per cent) felt committees should be more integrated, while a small minority (4 per cent) said the objectives of the employer and trustees were not aligned.

Mack said: “We keep saying to trustees that one of the ways [of] getting that to work much better is to actually focus on objectives and be clear about the strategies you need to achieve those, and you want everyone to be aligned to those objectives and strategies.”

A minority of trustees also said their current governance structure was not conducive to good decision-making (6 per cent) and that it did not enable decisions to be made quickly (7 per cent).

Jonathan Reynolds, independent trustee at Capital Cranfield Trustees, said for the new funding approach to work, trustees and sponsors need to work together.

“For it to be collaborative the most important thing is that trustees and employers should have joint training on it,” he said.

“If the trustees get trained up by their advisers and the employer gets trained up their accountant, you may get two totally different views on what on the funding code actually means.”