While some have welcomed the Pensions Regulator’s recently published and extensive collection of investment guidance for those running defined benefit pension schemes, there are some concerns over the effectiveness of the information for time-stretched or less diligent trustees.
The guidance comes nearly eight months after the regulator published its paper on 21, in which it put forward steps to improve standards of trusteeship amid concerns that not all are meeting governance expectations.
My first reaction was, why on earth are they wasting our money and their time on producing this sort of material?
Richard Butcher, PTL
Wide-ranging guidance
The new and extensive guidance, which is aimed at DB trustees, advisers and sponsoring employers, is split into a number of sections focusing on governance, investing to fund DB, matching assets, growth assets, implementation and monitoring.
It stressed how important it is “to obtain relevant professional advice in relation to the scheme’s investments”, while reminding them that “it is your role to decide how scheme assets should be invested, at least at a strategic level”.
Trustees are advised to follow “a collaborative approach”, while the guidance also explains the basics of reviewing a statement of investment principles, monitoring investment governance and safeguarding scheme assets.
Who will it benefit?
Richard Butcher, managing director at professional trustee company PTL, did not feel the guidance added much to what is available already, however. “My first reaction was, why on earth are they wasting our money and their time on producing this sort of material?” he said.
“There is so much material on their website that even somebody who does this every single day as a living can’t possibly keep up with it,” let alone a lay trustee, he explained.
The content is quite simple, and this could be quite useful, said Butcher. However, “people who are good, diligent trustees already know all of this stuff”, he noted. “They are not the audience for this.”
Those who are not familiar with what is explained in the guidance are either trustees who are incredibly busy and time-stretched, or trustees who are not diligent at all, “in which case they’re not going to look at this stuff either”, said Butcher.
The guidance could be useful for new trustees who needed a basic grounding in this information though, he said, “but otherwise it’s just a waste of time and money”.
Tackling wider investment questions
Joe Dabrowski, head of governance and investments at the Pension and Lifetime Savings Association, welcomed the guidance. He explained it is helpful to be showing trustees which areas they should be focusing on while navigating an increasingly complicated world of pensions.
When it comes to whether the guidance will especially benefit brand new trustees, as suggested by Butcher, Dabrowski said that it would be useful for new trustees but added: “I wouldn’t underestimate the benefit it would have for existing trustees as well.”
What makes a good trustee?
Comment: Since it launched, 'the 21st century trustee' has become synonymous with being well-equipped and capable, but what skills make for a good trustee who can help deliver positive outcomes for members?
He noted there are mixed levels of trustee abilities, and people constantly have training needs. "It’s important that people keep on top of the latest thinking and are made aware of all the types of things that they should be thinking of, because it’s quite easy to fall into habits,” he said.
A clear set of principles
For Rod Goodyer, partner at consultancy firm Barnett Waddingham, the principles the guidance sets out are clear and focus on "the right thing”, such as looking at governance constraints and issues on investment beliefs.
“They’ve kept it high level and haven’t gone into massive detail, but I think the principles they’re talking about [can be] applied to more complex things,” said Goodyer.
He noted the regulator has the difficult task of creating guidance equally applicable to small, medium and large schemes.
A lot that is in the guidance "is not new, or shouldn’t be new”, said Ian Neale, director at policy specialist Aries Insight.
He said the document's suggestion that it would be useful for trustees to develop and maintain a set of investment beliefs and be more aware of how markets work “is certainly going to be helpful”.
