Why the training debate should centre on pro rather than lay trustees

This followed an initial proposal from Europe that would have required all those ultimately responsible for the stewardship of pension schemes to hold a suitable qualification.

At first glance such a proposal may seem logical, but pragmatic considerations identify significant drawbacks: the UK’s pensions culture is founded on a system of trust law, in which the vast majority of those responsible for schemes are lay trustees.

This spirit of volunteerism was reinforced by the 1995 Pensions Act, which required one-third of a trustee board to have been nominated by the scheme members.

A requirement for formal qualifications could have the effect of excluding most trustees – both on the member and the employer side of the fence – from serving in their current role and could have a damaging impact on the operation of the UK pension system.

While qualifications for lay trustees are a desirable objective, this should remain on a voluntary basis. There is consensus that the overall standard of trusteeship should improve, but other initiatives can achieve this outcome.

Prevention better than cure

The position concerning professional trustees, who make a living from advising trustee boards, is different.

Clearly, the highest standards of performance should be expected of professional trustees. They should bring leadership and technical expertise backed by extensive industry experience to a board’s operation.

Anybody can describe themselves as a professional trustee, and this can have serious consequences

In the case of a sponsor becoming insolvent, the appointment of a professional trustee is a statutory requirement. However, in spite of the standards expected of professional trustees, there are no statutory requirements of those who serve in the role.

Anybody can describe themselves as a professional trustee, and this can have serious consequences. Last month, the regulator replaced three ‘professional’ trustees accused of being part of a £14m fraud.

While removing unsuitable figures is important, it is clearly desirable to prevent such individuals from becoming trustees in the first place.

Fortunately, the establishment of the Association of Professional Pension Trustees three years ago has played a vital role in maintaining market confidence in professional trustees by ensuring the highest standards are met by its members.

It requires that applicants hold an appropriate professional qualification. As most professional trustees have previously worked within the industry, this means most APPT members hold qualifications relevant to their role and are supervised by a recognised professional body.

Those who do not are required as a minimum to have completed the Pensions Management Institute Awards in Pension Trusteeship or at the very least the regulator’s trustee toolkit.

The latest qualifications

Recently, PMI and APPT have been in discussion about developing a new qualification to specifically address the standards expected of professional trustees.

The proposed new qualification would assess in particular the soft skills that characterise the effective professional trustee: leadership, judgment and prioritisation.

Current trends suggest trusteeship is likely to become increasingly professionalised in coming years.

With an expanding role for professional trustees, it is vital they have a strong and credible body to represent them and qualifications to demonstrate professional competence. 

Through demanding the highest professional standards of its members, APPT is working to fulfil the first – and the new qualification will play a significant part in achieving the second.

Tim Middleton is technical consultant at the Pensions Management Institute