Trustees must adopt more transparent practices

Trustees have historically tended to be quiet, not often heard outside board meetings, and arguably of limited visibility to their membership, except perhaps for the chair’s signature on a newsletter or set of annual accounts.

As well as Carillion, trustees of the GKN pension schemes have been in the news saying that any takeover of the company would necessitate dealing with them, and more specifically that potential purchasers would need to come up with plans to deal with a funding deficit.

Fantastic, although this reads as an unusual occurrence. I am sure that potential purchasers of businesses in UK plc are given advice that takes the funding of pension schemes into account in any deals, but it is refreshing to hear trustees remind them of their obligations.

Get to know your employer

Pensions knowledge and understanding, particularly in defined benefit schemes, is arguably now the base level of what trustees need to know.

They need help to understand better the commercial, financial and covenant-related aspects of the employer’s business.

A board of high-quality trustees may have strong governance structures and work well together, but if the relationship with the sponsor has broken down it will be difficult to achieve positive outcomes for members.

Working quietly in the background cannot really be appropriate for member perception of the security and efficiency of workplace pension schemes

The relationship and balance of power between the employer and trustees varies from scheme to scheme. Nonetheless, there is a consistent theme that relates to the importance of the relationship with the employer, and the challenges trustee boards face in getting it right. 

Members of these schemes will surely take comfort from the fact that the trustees are demonstrating their independence and their commitment to managing that scheme on the member’s behalf.

Three essentials for transparency

Why do many members not know who their trustees are, or what they do for them on a day-to-day basis, as well as in times of corporate restructure?

Trustees should be asking themselves if, in the eyes of their members, they are demonstrating:

• Timeliness

• Accurate information, guidance and advice

• Appropriate levels of communications and comprehension – do the members understand their options and implications of any decisions?

Demonstrating these areas soundly should provide the members with confidence that the trustees can deal with their affairs.

Trustees increasingly have to contend with the Pensions Regulator or the Financial Conduct Authority’s compliance and oversight functions, but they should be ensuring transparency and alignment with the members of their pension schemes anyway.

How do members know that their trustees have the skills and experience to do the role, that they are professional and engaged in managing the scheme on their behalf, and that where appropriate, they are working with the employer in a professional manner?

What about decisions to spend more money on governance and investment than say, member communications?

Embrace the limelight

Trustees should develop an overall communication strategy that covers all of their members’ pension savings journey in the scheme, from joining, ongoing savings, life changes as they lead up to retirement, and perhaps beyond.

Do trustees give equal weight to the interests of deferred members, pensioners and active members? How do members know until something goes wrong?

The world is changing and trustees need to adapt to it.

In a time of increasingly immediate commentary and opinion, working quietly in the background cannot really be appropriate for member perception of the security and efficiency of workplace pension schemes in the UK today.

Surely there is a debate to be had in 2018 on why trustees are not as visible, transparent, and accessible to the wider world.

Robert Branagh is president of the Pensions Management Institute