Being a trustee of any organisation, fund, group or the like has usually been challenging. Indeed, if it is not, then something may not be right. This is no different for pension trustees as they oversee the investment, management and distribution of pension assets for the benefit of the members, whether they be active, deferred or annuitants. This trustee role has been in sharp focus in recent years with some high-level UK businesses struggling (and in some cases wriggling!) with their accrued liabilities.

The Pensions Regulator (TPR) is very helpful in detailing the requirements for trustees and often sends updates and reminders of the responsibilities required of trustees as these evolve and change. A good example of change may be the Competition & Markets Authority (CMA) Order 2019. This is due to be implemented on 10 December 2019 and many schemes need to be ready for this update. For information, the CMA Order was issued on 10 June 2019. It is a legally binding order to help pension trustees make better decisions. It places new responsibilities and duties on trustees.

There are some good factsheets available from various actuarial sources and a helpful example from the Cartwright Group may be found here: https://cartwright.co.uk/industry_updates/Cartwright%20Update%20-%20CMA%20Review%20of%20the%20Investment%20Consultancy%20and%20Fiduciary%20Management%20Markets%20-%20August%202019.pdf

What this Order is likely to mean is that with effect from 10 December, trustees must not enter into a new contract, or continue to obtain existing investment consultancy services, unless objectives have been set. Decisions about these objectives must be documented. Objectives are likely to be partly quantitative (e.g. performance relative to liabilities) and partly qualitative (e.g. communication skills).

As you may anticipate, The Pensions Regulator has issued some draft guidance for trustees which includes a 'scorecard' of objectives / criteria for investment consultants: https://www.thepensionsregulator.gov.uk/-/media/thepensionsregulator/files/import/pdf/setting-objectives-for-providers-of-investment-consultancy-services-guide.ashx

It is clear that the ongoing evaluation of a pension scheme, from its service providers, to its investment management, to its costs, to scheme risk need to be monitored carefully.

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Legislation changes

With any legislation change (and more were noted in The Queen's Speech in Westminster on 14 October 2019), or scheme renewal and review (such as the Triennial Review), regular trustee review is always advised and, in most cases, required when completing returns, such as the FRS102 and the annual Pensions Regulator return.

You will see that these notes have been focused on defined benefit (DB) / final salary type plans, but you will see from the following link on The Pensions Regulator website (trustees page), that the managing of Defined Contribution (DC) benefits is also of great importance: https://www.tpr.gov.uk/en/trustees

Scheme evolution & changes

One thing is for certain: we all get a year older each year. A pension scheme evolves in line with the age of its members, meaning that the profile of the pension scheme in terms of the age of the membership and their need to draw benefits as the scheme matures is important.

There are many points for the trustees of a pension scheme to understand, consider and manage and the list below is not exhaustive:

  • The current funding position of the scheme and any agreed funding arrangement with the employer, and the quality of the covenant from the employer, is vital for the security of the membership
  • The existing service and investment providers / advisers
  • The current investment model being used by the scheme to meet its obligations, as they are expected to arise and as they change. We are aware that defined benefit transfers out from schemes have been topical of late and this has meant that some schemes have required additional immediate liquidity to meet these requests, selling assets where required
  • The scheme rules, and any agreed amendments, are an excellent starting point to review an existing arrangement

Our services

We have provided guidance and advice to pension trustees on the investment allocation and management of schemes for over a decade. This advice and guidance tends to be for smaller schemes (up to 100 members). For larger schemes we would refer enquirers on to other providers that may have greater capacity to provide the service that the trustees of larger schemes may require for ongoing servicing of the scheme, along with the needs of the members.

As you will appreciate, we are not actuaries and we do not offer actuarial advice. However, we are able to provide referrals to suitably qualified actuaries where appropriate.

No individual advice is provided during the course of this webpage.