Surrounded by rocks and hard places: The perils of modern pension trusteeship

The role of a pensions trustee has always been difficult to navigate.

This is largely because pension schemes are inherently long-term in nature, whereas the successive governments who tweak, and frequently overhaul, the pensions regime are typically only focused on the next four years in the election cycle.

As a consequence, pension trustees are frequently forced to navigate their way through an increasingly challenging, and often contradictory, regulatory environment.

Take for instance:

• a government with a stated goal of freeing up trapped surpluses in pension schemes to encourage investment in the UK economy, while so far failing to address the implications of the Virgin Media case, which could see surpluses reduced substantially
• an expectation on trustees to consider environmental, social and governance factors in their investments, but no legal protection available if the financial performance of a scheme suffers when they don’t focus solely on seeking the best returns for their investments
• an expectation that trustee boards will reflect equality, diversity and inclusion objectives by recruiting candidates from a wider range of backgrounds and experiences, against the backdrop of ever-increasing knowledge and understanding requirements for trustees which would put off anyone who doesn’t have at least 20 years’ pensions industry experience (and indeed many who do)
• a regulator which expects trustees to move to buy-out and wind-up as soon as possible, while at the same time:
  • introducing a funding code, which might have been fit for purpose 10 years ago, requiring trustees to increase their spend on actuarial and covenant advisor fees, thus making endgame solutions less affordable, and
  • not relaxing its expectations for meeting the costly new dashboard requirements for schemes which are in the middle of their buy-out and wind-up process.

Pension trustees play a crucial role in ensuring pension schemes are run effectively and that members' benefits are secure. But it’s perhaps little wonder that it’s becoming harder and harder to recruit new lay trustees to fulfil this vital service.

If you are a trustee who is affected by any of the issues featured in today’s blog, why not give us a call to see if there is anything we can do to help? 

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