The Pension Trustees Guide to staying safe post-pandemic

Many helpful articles have been written over the last few months on how best to run remote trustee meetings, with useful tips and shared experiences.

Fortunately, great technology has been there for us. It is challenging for a chair to run trustee meetings remotely, but it could have been so much worse if everything had to be done by conference call.

Of course, there have been downsides.

It can be hard for a new trustee to build rapport with the rest of the trustee board, unreliable wifi can scupper a meeting, and it can be difficult to read body language over the small screen - often a vital element in trustee discussions. But we have all kept going and trustee business has continued in more or less a ‘business as usual’ state.

Much of 2020 has been about keeping things ticking along and minimising risk for the scheme, whether in day-to-day operations or investment changes.

However, now we can see some positive signs on the horizon – vaccines being rolled out and the real prospect of being able to meet up in 2021 – it’s time to think about whether any elements of governance have slipped over lockdown and what trustees should be focussing on as we head into a new year.

Here are some to think about:

• Business plan/activities planned
• Trustee board
• Advisers
• Agenda structure
• Decisions and supporting documentation
• The basics

Business plan/activities planned

Are they still the right ones or do the scheme’s priorities/objectives need to change? Do you have training organised for the right time? You might have some expertise on the trustee board but is everyone’s knowledge and understanding good enough for the decisions which need taken? For example, if you’re thinking about embarking on a buy-in project, do all the trustees understand how the pricing will work or is training needed before you approach the market?

Trustee board

Have you carried out a board effectiveness review lately or a skills assessment of the trustee board? If not, how do you know what training is needed and where the gaps in knowledge lie? What about succession planning? Is there a particular skill set within the trustee board which would be hard to replace and, if so, how might you mitigate this risk?

Is your trustee board diverse enough, or is it made up of trustees of similar background, education, gender and ethnic origin? If it’s lacking in diversity, have you thought about changing your member nominated trustee process to be more of a selection, rather than an election process? Would it be sensible to change this now? What about raising the issue with the employer to ensure diversity is taken into account when the next employer nominated trustee is selected for the board?

Advisers

The Pensions Regulator expects trustees to carry out a formal review of their advisers every three years. That might be in the form of a market review to get competitive quotes or a more formal assessment of past performance and costs. You don’t want to change all of your advisers at the same time, so have you decided on a timetable as well as the format?

Agenda structure

Is your trustee agenda structured in the right way? Are you dealing with the important strategic issues up front while everyone at the trustee meeting is fresh and alert? Is your agenda ‘forward looking’ or is too much time spent reporting on the previous quarter?

Are you delegating sufficient business to sub-committees so that full trustee meetings don’t need to get bogged down in the detail? Are the terms of reference for these sub-committees correct with the appropriate authority given? How effective is the reporting from these sub-committees to the trustee board? Are they escalating the issues which need a trustee board decision and giving a proper overview of the committee’s activity?

Decisions and supporting documentation

Trustees need to take decisions based on the relevant facts and evidence before them. If ever called upon to justify a decision taken, evidence can’t be manufactured retrospectively and it must be properly documented in case it is later challenged. Already a fundamental principle of conducting trustee business, it’s going to be increasingly important when dealing with the Pension Regulator’s new funding code when the onus is going to be on trustees to evidence why particular decisions were taken.

Investment governance is increasingly coming to the fore, particularly around ESG and climate change. Right now, the focus is on the biggest schemes demonstrating they have considered climate related risks and opportunities in their investment decision making, but this is likely to be relevant for all but the smallest schemes eventually. So, plan early and carry out the necessary investigations with your investment managers. Get that supporting evidence and documentation in place so you can explain your approach clearly.

And finally, don’t overlook the basics

Make sure minutes and paperwork are up to date. Were minutes approved during lockdown but not signed? Get them signed and into the minute book.

If you completed a project or entered into a new contract, did you get key dates and actions in everyone’s diary, with contract governance oversight in place? Did you get project documentation safely stored and indexed making it easy to find if you need it in the future?

What about member communications? If you went through ten drafts before everyone agreed on the final version, make sure you’ve got that version saved as the final copy. In the relief of getting something over the line it can be easy to forget these final important tasks.

There are lots of things to think about, with planning and organisation being key to keeping the trustee board ‘safe’ in terms of meeting its obligations and responsibilities.

Given the personal risk and potential liability for trustees in carrying out their trustee duties, make sure you keep yourself safe post lockdown and beyond.