Irish pension funds managing more than €2m should be required to employ a professional trustee, the head of Trustee Decisions has said.
Speaking as Ireland’s Pensions Board held the first of its public consultations on the future of defined contribution (DC) regulation, James Kavanagh also warned that a code of governance could have unintended consequences and result in the matter becoming a box-ticking exercise for trustees.
Speaking at the event in Dublin earlier this week, Kavanagh – also chair of the Irish Association of Pension Funds’ (IAPF) DC committee – said the association acknowledged the important role played by lay trustees.
“That said, the IAPF believes effective trusteeship should be executed with competence, knowledge and understanding and by those individuals who can attest to being informed – and who stay informed – who are pensions literate and are skilled in their prudential duties,” he said.
Speaking in his capacity as managing director of Trustee Decisions, Kavanagh also urged trustees to not follow advisers’ decisions without questioning the advice given.
“It should be remembered, however, that a trustee’s job is to mandate and challenge these advisers, not to solely rely on or to be solely led by them,” he said.
“Sure, one should seek specialist advice and delegate tasks, but one cannot delegate responsibility.”
He also called for trustee education to be expanded, with trustees required to attend 10 hours of further education a year, covering a range of issues from investment and administration to ethics and the effective management of advisers.
However, Kavanagh went further and recommended the introduction of an official certificate for qualified trustees, and the requirement that all schemes with more than €2m in assets or 100 members have a professional trustee on their board.
“I am saying existing trustees are applying themselves to the task at hand and, again, I have to applaud the existing work of trustees, especially lay trustees,” he said.
“But we need to find ways to be more professional in the prudential role.”
He added: “We have a wealth of talent of professional advisers in this country.
“But we need to ensure we have trustees who are knowledgeable, do not over-rely on advisers, operate with strategic clarity, have effective real-time decision-making procedures, are capable of adapting to change and manage conflict-of-interest issues.
“All of this requires courage by trustees, especially in the area of challenging their advisers.”