Out of reach: How can we close the trustee skills gap?

You also probably work on behalf of one of the UK’s large pension schemes, which is where the most sophisticated continual trustee training programmes are generally found. 

When we last looked at the broader trustee training needs in this feature, the European Commission’s Institutions for Occupational Retirement Provision directive – which included a proposal to require each individual trustee to pass a qualification – was still very much on the cards. 

That has been all but dropped and we have since then seen the prevalence of professional trustees on boards mushroom, as they increasingly provide the ‘qualified’ component on scheme boards. 

But that aside, the number of trustees out there not undertaking ongoing training from the main pension industry’s bodies remains huge – and could become increasingly problematic as we move into an era of mass pension participation and more stringent governance.

Later this year we will publish in-depth research on the ability of trustees and scheme governing bodies to fulfil their roles and responsibilities in an increasingly complex pensions environment

Pensions Regulator

Tim Middleton, technical consultant at the Pensions Management Institute, which provides training and education for those involved in the running of pension schemes, said it deals with just the “tip of a very large pyramid” comprising only the most engaged trustees.

Alongside its broader individual membership offering the PMI provides discounted trustee group memberships for whole boards. This gives those boards the opportunity to work collectively towards a training certificate, which enables the scheme to demonstrate it is well run.

However, it currently has around just 650 individual members in this group out of many thousands of trustees across the UK.

Middleton would like to see the Pensions Regulator include some detail on trustee training in the scheme return, where boards could evidence they had carried out some form of training during the year.

“I think if that became a mandatory requirement that would be an appropriate incentive for trustees to up their game,” Middleton said. 

However, he added the regulator had thus far resisted this idea because of the large amount of information they already collect via the scheme return. 

But the regulator said it is keen to better understand the skills gap. It is currently carrying out research into how schemes are managing their training needs. 

It has asked more than 800 trustees about how their boards operate, their knowledge, skills and training, and their relationships with their advisers.

“Later this year we will publish in-depth research on the ability of trustees and scheme governing bodies to fulfil their roles and responsibilities in an increasingly complex pensions environment,” a spokesperson said.

Education policy 

Ian Pittaway, partner at law firm Sackers, said the new requirements in the defined contribution space were adding to the imperative to get a handle on trustee training. 

He said: “Chairs will have to comment in their statutory annual statement about the competence and training of their fellow trustees, so this is likely to increase further peer pressure for trustee directors to take training very seriously.” 

Despite the frequent hoo-ha, I have yet to see a serious study of trust performances which show that those with professional trustees perform any better than those without

Barry Parr, AMNT

Pittaway said there is already evidence that this pressure is changing behaviours. 

“A number of schemes have themselves imposed a requirement that all trustees pass the [regulator's online] trustee toolkit as a minimum. So standards are being driven up on DB and DC boards on a voluntary basis,” he said, adding that more transparency around each scheme’s education policy would increase awareness and help to further raise standards. 

He said that while such policies are often referred to in the annual report and accounts, schemes tend not to broadcast them beyond material inviting members to put themselves forward as trustees. 

Barry Parr, co-chair of the Association of Member Nominated Trustees, said “significant” schemes – those with more than around £30m in assets – make up 10 per cent of overall schemes but 90 per cent in members and assets, and these, he said, do tend to have policies on trustee education.

“It is quite common, for example, for trust boards to run an annual survey on training needs and then to arrange sessions during the year,” Parr said, adding that trusts have been running successfully this way for many years. 

Professional trustees

Middleton said that while there a good argument for volunteerism and for lay trustees continuing in the role, without any major regulatory imperative the trend towards either sole trusteeship or the involvement of professional trustees is inevitable. 

“The kind of pressures that are making it difficult for [trustees] to continue in the role aren’t really any fault of theirs,” he said. “And it’s a shame, but it’s clearly the case now that in order to ensure that schemes are managed appropriately I think it’s inevitable that we’re going to see more and more involvement by professional trustees.” 

However, Parr was eager to point out that the addition of professional trustees does not automatically equate to higher standards and more research is needed. 

He said: “Quite interestingly, despite the frequent hoo-ha, I have yet to see a serious study of trust performances which show that those with professional trustees perform any better than those without.”