Professional trustees have called for a body to set standards and monitor performance in the industry, but experts have cautioned against any measure that threatens the level of cognitive diversity on trustee boards.
An Eversheds Sutherland survey of professional trustees, seen by Pensions Expert, has revealed that almost 90 per cent of respondents agreed with the Pensions Regulator that tougher standards of duty and care should be expected from professionals than lay trustees.
I for one couldn’t see how we could have a two-tier regulatory system
Tony Filbin, Capital Cranfield Trustees
The survey found that 71 per cent said a professional body should safeguard these standards, although just 38 per cent were in favour of the introduction of mandatory qualifications.
The findings come as the regulator's 21st century trusteeship programme takes aim at both the professional and lay members of poorly governed trustee boards.
Sarah Swift, a pensions partner at Eversheds Sutherland, said of the survey results: “It could be helpful for there to be a set of standards… especially with the regulator saying, ‘Well we expect higher standards from professionals’.”
However, she said the balance of power between a new professional body charged with upholding standards and the existing regulator was still up for debate.
Working groups want accreditation scheme
The professional trustee industry already has a representative body in the Association of Professional Pension Trustees.
The APPT aims to encourage and promote good professional trusteeship and its value to schemes, and publishes a buyers' guide to professional trustees. It has previously explored the creation of an exam-based qualification for professional trustees.
Tim Middleton, secretary to the APPT and technical consultant at the Pensions Management Institute, said demographic and resource problems would frustrate any attempt for a regulator with teeth comparable to the main pensions watchdog.
Source: Eversheds Sutherland
He estimated that the body might represent around 400 professionals.
“When you have got that small a cohort it’s very difficult to have something like, for example, [what] the Institute and Faculty of Actuaries have got, where they can take formal legal proceedings,” he said.
Instead, Middleton envisaged an accreditation regime combining continuous professional development requirements with internal peer review practices.
New regime must preserve diversity
Alan Pickering, chairman of Bestrustees, said professionals must show they warrant the name.
But he said accreditation by the APPT was sufficient, so long as it allows buyers to distinguish between professionals with specific pensions expertise and other useful additions to a board, such as experienced non-executive directors from the corporate sphere.
An overly prescriptive new regulatory body insisting on specific pensions knowledge might steer boards away from the latter.
“We need to do whatever we can to beef up the buy side,” he said, warning failure to do so would “end up with a stultified market that has little innovation and is suboptimal”.
Who should be in charge?
Earlier this year, the regulator tasked the Professional Trustee Standards Working Group with outlining the standards required, and the APPT-led group is expected to publish its suggestions before the end of 2017.
However, there are those who question whether the APPT is the right body to administer any new standards regime.
Tony Filbin, group chairman of Capital Cranfield Trustees, said the pensions industry’s goal should be to regain the trust of society.
“You have got less chance of doing that if you have some form of self-regulation,” he said.
Filbin recommended a ‘fit and proper’ test, which will be imposed on anyone involved in running a mastertrust anyway as a result of the Pension Schemes Act 2017.
“I for one couldn’t see how we could have a two-tier regulatory system,” he said, adding that the regulator has more resources to extend its remit than it is often said to.
Better trusteeship key to any future DB plans
Efforts to improve the level of experience and competence of trustee boards must not come at the expense of diversity, politicians have warned, as dealing with groupthink remains a key concern in defined benefit pensions.
Regulator may not be interested
Andrew Parker, a director at Law Debenture Pension Trustees and an APPT council member, responded that there is little difference between the ‘fit and proper’ regime and the proposals for self-regulation.
“That’s effectively what we’re doing; it’s determining whether someone has got the experience, judgment and skills required to do that role,” he said.
Parker added: “I’m not sure that the regulator will want to step in and regulate trustees in that way.”
