At the end of May, I had the pleasure and privilege to speak at Professional Pensions Live. The discussion centred on the future of trusteeship, a topic that has come up frequently since I joined Vidett.

The Pensions Regulator (TPR) has set out a vision for the future and I am encouraged by its direction. Imagine a world where pension schemes are fewer but larger; decisions are data-driven and efficiently executed; and information flows seamlessly between trustees, members and schemes. In this landscape, inefficiencies are reduced, small pots consolidated and members empowered to make informed decisions throughout their retirement journey. Costs are lowered and true value is realised.

Navigating the path to this future

While the vision is promising, achieving it requires navigating complex decisions, managing or assessing new types of risk and optimising data and systems. Trustees play a pivotal role in this transformation, which is why TPR is focusing on how best to oversee professional trustees moving forward.

A future market built on standardisation, risk management and accountability must also consider scheme governance and professional trustee oversight. During my presentation at PP Live, I posed two fundamental questions that could shape this oversight:

• Are professional trustees governed appropriately?
• Are scheme boards operating effectively?

Addressing these questions helps clarify regulatory focus on:

• well governed schemes
• high standards of administration and good quality data
• operational resilience (including cyber security)

Good practises within the whole industry should therefore be the focus, not professional trustees in isolation. It’s important to remember this as it’s a collective goal. Many trustees have voiced concern over data and administration in particular – they have limited powers with their service provider but the responsibility sits with them. This is a risk that needs to be understood better and this engagement will allow for that.

As professional trustee firms grow, their influence over the good practises can be felt.  The governance structures of these firms must also evolve accordingly as they mature, like any growing company. Corporate governance, decision-making processes, conflict management, risk controls and staff expertise should all mature alongside business expansion. I note TPR acknowledges that offering multiple services can enhance efficiency for a scheme and value for members – but only if conflicts of interest are properly managed and a transparent procurement process has been run.

Ensuring effective pension scheme boards

The effectiveness of scheme boards is another critical consideration. Boards that embrace cognitive diversity encourage debate, challenge assumptions and improve decision-making. By ensuring the right people with the right skills are appointed and reviewed annually, oversight can shift from individuals to scheme boards as a whole. Given all trustees are subject to scrutiny, regulatory reviews should extend beyond professional trustees alone. As TPR highlighted, effectiveness and accountability should be monitored across a board.

Implications of the review of professional trustees (and not just to them)

Existing protections already address many of the above concerns, but here are key areas where regulatory oversight may evolve or impact schemes and their trustees:

• Mandatory pension scheme board evaluations – obligatory annual board reviews with minimum requirements to review skills, effectiveness and tenure by independent firms.
• Standardised competency requirements for trustees – similar to the Financial Conduct Authority’s Senior Managers Regime and the master trust code, trustees may need to demonstrate knowledge and suitability for their roles, with governance boards annually reporting training and effectiveness to TPR.
• Greater focus on decision making – time with TPR as part of the scheme oversight to review how decisions were made and any issues with service providers or data. This should also include how provider reviews have taken place and procurement decisions made, in addition to usual scheme management insights.
• Greater transparency in trustee company decision-making – to mitigate conflicts and enhance accountability, companies may need to evaluate their governance structures, risk management and remuneration frameworks more rigorously. Trustees should also ensure service procurement processes include assessment of conflicts.
• Supervision of sole trustees – a framework to oversee decision making for moving to sole trusteeship and for decision making within sole trusteeship could be introduced to monitor these appointments more closely.

Ultimately, these measures represent good governance practices that enhance member protection, encourage board effectiveness and ensure transparent procurement and decision-making. They also bring accountability to the employer, trustee and scheme support to deliver the standards members would expect of us.

Strengthening the relationship between trustees and TPR

One significant takeaway from the PP Live discussion was the importance of ongoing engagement between trustees and TPR. Trustees represent members and some challenges they face require regulatory collaboration to resolve. By participating in this conversation, trustees can help shape a regulatory framework that acknowledges their challenges while reinforcing the value they provide.

Any new governance provisions should be welcomed if they contribute to realising the shared vision of a more efficient, accountable and effective pensions market.

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To learn more about the above, please contact it’s author Alison Hatcher our Head of Trusteeship.

Please note this article originally featured with Professional Pensions.