The Irish Association of Pension Funds (IAPF) has raised concerns about the impact of stricter trustee-qualification thresholds proposed by its regulator, after a consultation suggested trustees have at least two years of experience.
The consultation, released by the Pensions Authority on 18 July ahead of detailed reform proposals to the government by the end of the year, seeks to bring Ireland’s oversight of trustee boards into line with the revised IORP Directive.
It recommends that trustee boards possess a certain level of collective knowledge – including the potential for an entry threshold of two years’ experience for trustees lacking formal qualifications.
Jerry Moriarty, chief executive of the IAPF, questioned how trustees would be able to gain the minimum two years of experience without completing formal qualifications, and noted that the cost and time commitment involved in completing the Irish Institute of Pension Managers’ courses could deter lay trustees.
“Unless you do [the qualifications], or have two years’ experience, I don’t see how you can become a trustee,” Moriarty said. “And I don’t see how you can get two years’ experience without being a trustee with no experience at some stage.”
However, Moriarty did welcome the Authority’s pledge it was not seeking to professionalise trusteeship, with the consultation saying lay trustees could bring “a significant amount to their role as a trustee”.
Brendan Kennedy, who heads the Authority, told IPE the body had attempted to “strike a balance” when drafting its proposals.
“We are aware of the fact lay trustees are a very important part of the system, and there would be a great deal of opposition to removing a place for lay trustees from our system,” he said.
The IAPF has been among those resisting rigid requirements for trustees, warning a professionalisation of the field risked imposing “group think”.
However, the proposals, as drafted, would not completely exclude lay trustees, as the new requirements would only apply to the trustee board as a collective.
The Authority set out that a trustee board should consist of at least two members – one with at least two years’ experience, and a second member who had revised and “enhanced” qualifications.
However, the emphasis on the requirements applying to a trustee board “on a collective basis” would likely allow for inexperienced lay trustees to join boards with two or more qualified trustees.
Kennedy admitted the new trustee-qualification requirements were, in part, to bring about “rationalisation” within the sector, which would not be required if a larger pool of trustees were available.
“The trustee pool is finite, which may encourage consolidation – one of the reasons we want to see consolidation is because the trustee pool is finite,” he said, likening it to a “chicken and egg” situation.
The Authority was also considering other measures to bring about scheme mergers in the defined contribution (DC) space, including how the industry reimburses the regulator’s running costs.
Kennedy said it was always possible to see a shift to a fund-based fee, which would remove any disincentive to create large-scale DC master trusts.
The Authority has said any such multi-employer trustees should expect to be subject to stricter requirements than individual company-sponsored funds, including minimum capital requirements, which would cover any costs associated with a scheme’s wind-up.