More than just a pressing need to know

Anyone making decisions at pension funds now has to be well and truly informed. Not only has the exponential growth in pensions products on the market complicated the investment process, but stricter laws on accountability have sharpened the arguments for the thorough education of both pension trustees and staff in Europe.

In Switzerland, for example, there are now a number of providers offering training for pension scheme trustees, says Edouard Stucki, senior investment consultant at Watson Wyatt in Zurich.

Since the revisions of the BVG Swiss pension law which took effect in stages over the last three years, pension fund trustees are now legally obliged to train and keep up to date with changes in pensions law, he says.

“A pension fund is required to ensure the initial and follow-on training of both employee and employer trustees, in so far as they need to manage the pension fund,” he says.

Irrespective of the legal obligation to be trained, trustees certainly need to know a lot more than was the case a few years ago, says Stucki. “The development of new investment products is increasing at such a speed that trustees have no chance of catching up,” he says. “This will be recognised soon, and the time may come for trustees to have professional status.”

The burden upon them is simply becoming to great for volunteers to shoulder. “It is unfair on trustees,” he says. And the prudent man rule is developing into an expert/professional rule where standards for trustees as they stand now, are not sufficient, he says.

Not only do the Swiss universities offer training sessions, but the technical colleges do so too. Trade unions also offer training for union members who are also pension fund trustees, as do the business schools, says Stucki. The Swiss Association of Pension Funds (ASIP) offers more general training sessions, he says.

Pensions consultancies such as Watson Wyatt also offer training sessions, he says, and these would typically be tailored to the needs of a particular trustee or set of trustees.

In the UK, the University of Westminster launched the Pension Investment Academy last September, in conjunction with Goldman Sachs Asset Management. The academy runs a programme of free evening seminars, with one taking place each month. The sessions are designed to help pension fund trustees and postgraduate finance students at the university get together and hone their pensions knowledge.

Orla Gough, who is head of the finance and business law department at the university, initiated the whole project and runs the seminars.

“It’s always been one of those things that the great and good have said - that member trustees need as much education as possible,” she says.

But it is not just the member-nominated trustees who participate. Even though it can be argued that corporate trustees already have a financial background, they can also benefit from pensions education and training, particularly on the benefits side, as this is not generally an area they are familiar with, says Gough.

Training can equip trustees with the knowledge they need to judge the investment services and products they are offered. “The feeling among trustees when they have another pensions consultant or asset manager coming to see them is - here is another person selling us something,” she says. “It’s one of their great fears.”

Gough, who has been involved in pensions for 20 years, says she has long felt there was a need for this type of communication and education. “I was very keen to have a venue or vehicle where pensions trustees and students at the post-graduate level could be in the same classroom,” she says.


When the offer of sponsorship came from Goldman Sachs, Gough says she was very conscious that she did not want the institution to use the forum as a place to sell any of its products. These fears have proved unfounded, however, and it is the GSAM funding that has enabled the seminars to include talks from industry gurus.

Rosanne Corbett, senior associate at Mercer in London, acknowledges that asset-manager sponsorship could lend a suggestion of bias to pensions education. “The important point about training is that it’s supposed to be objective,” she says. Where there is sponsorship from an asset manager, a conflict of interest could be perceived, she says, but it is very unlikely that there actually would be any bias.

The Pension Investment Academy seminars are very confidential, says Gough, and the trustees like talking to the students. In turn, the students are able to give their take on pensions issues, and benefit from the networking opportunities, says Gough.

It is important to make sure the speakers pitch their words at the right level, she says. “I’m always very careful with brief, especially when it comes to academics,” she says. “We have to sort out the language and jargon that we use.”

The Pensions Act 2004 was quite specific about trustees and the knowledge that they are required to have, says Corbett. Sections 247-249 require trustees to have knowledge and understanding of the law relating to pensions and trusts, and the principles relating to the funding of occupational schemes and the investment of scheme assets, according to information from the Pensions Regulator.

Trustees must also be conversant with their own scheme’s policy documents, the regulator says, adding that it has taken the phrase ‘conversant with’ to mean having a good enough working knowledge of the documents that they are able to use them effectively when carrying out their duties as a trustee.

The Pensions Management Institute lists all training providers in the UK, and the National Association of Pension Funds has various training opportunities which they run around the country, says Corbett.

Generally, the pensions consultancies in the UK offer their own trustee training, as do investment managers. “There are a lot of opportunities
to receive training, but understanding what is going to be right is something that’s not always considered,” she says.

Mercer is increasingly working with trustees who need to understand what their training needs are, she
says. Training is therefore often specific to a particular scheme. It must be aimed at enabling the trustees to make generally informed decisions.

“Having the right training comes down to not just the content of the training, but also how that training is delivered,” she says, adding that it must be practical in nature. “It is better to have timely training that fits in around decision-making,” she says.

As well as running courses aimed at new trustees and at existing trustees who are aiming to build up their knowledge, Mercer offers bespoke training, says Corbett. “We will perform a gap analysis and provide training based on those perspectives, she says.

“Being able to train as a group is an excellent opportunity to engage as a group,” she says, as trustees do not often have the chance to work with each other in this way.

Hewitt Associates also provides training aimed at trustees and people on the corporate side of pensions, says Lynda Whitney, actuary and trustee adviser at Hewitts. This includes sessions for new trustees who are trying to get to grips with what their responsibilities are, and half-day sessions that focus on how their decisions impact the business.

The firm also hosts teleconferences which can be accessed, and allow trustees to develop their skills. “There is also a certain amount of ‘just-in-time’ training” says Whitney. For example, she explains, if trustees are heading into an actuarial valuation, they can call the firm in one hour before or after the event.

Similarly, lawyers may provide trustees with updates in changes in the law around an important meeting, she says. “Things are changing very fast, so trustees have had a lot to get to grips with in terms of the Pensions Act, and the swathes of changes which have been coming through from government, such as the Finance Act and the anti-age discrimination legislation. It’s not enough just to do an initial training,” she says.

Training is geared both towards the appointed and the member-nominated trustees, she says, as well as those people on the corporate side who face-off against the trustees. These people, she points out, who may not have been involved in pensions in the past, may have good financial expertise, but may not understand the roles and responsibilities of trustees.

Having training to give that understanding can be very useful in easing the pensions governance process. “Trustees are not being difficult when they say they need to know more about the company strategy,” she says.

While many of the new pensions training services in Europe have focused on trustees and board members at pension schemes, there is also a drive to firm up the educational opportunities for professionals.

In London, the Cass Business School at City University, is setting up an MSc in Pensions, and plans to run the postgraduate course from next autumn.

It will be “the world’s first postgraduate masters programme specifically dedicated to providing a global education for those working or planning to work in the pensions industry”, according to David Blake, director of the Pensions Institute and professor of pension economics at Cass and Bernard Casey, director of the MSc Pensions Programme at Cass.

There will be a full-time programme, lasting a year, and a part-time one which takes two years. Blake and Casey say there could not be a more opportune moment to launch the MSc in Pensions. “Countries around the globe are fast waking up to the fact that they have a major challenge on their hands with their pension schemes,” they say.

Rapidly changing populations and fertility rates well below replacement rates have combined to create a marked increase in the dependency ratios in many countries, and this has implications for public pensions and public finances more generally.

Schemes in the private sector, too, are having severe trouble with funding because of weak stock market returns and falling interest rates, they say.

“What is clearly needed is a well-trained group of professionals capable of providing appropriate and sustainable pensions solutions to a highly complex problem,” they say.

They describe the graduates they hope to produce as “pension scientists”, who know how to deal with the multi-disciplinary nature of pension problems. “The problem we found ourselves facing is that although there are people with expertise in pensions, their expertise tends to be one-dimensional,” they say. While pension lawyers might understand pension rules and regulations well, they may have a poor grasp of how pensions fit into lifecycle financial planning, they say.


On the other hand, pension actuaries able to make sophisticated pension liabilities calculations might not understand the financial risks in pension funds well enough. Skilled investment managers might not know how pension liabilities respond to macroeconomic or demographic shocks, and pension accountants who know all about pension accounting standards might not know how they affect corporate dividend and investment policy.

“We felt that was time to look at the ‘pensions mountain’ from all sides,” Blake and Casey say.

Subjects to be covered in the MSc include pension economics, pension finance, actuarial principles for pensions, pension accounting, pension law, comparative pensions systems and regulation, social policy and ageing populations and relevant quantitative methods for pensions.

In the Netherlands, the Association for Pension Education (SPO) is the biggest and most important training institute, according to the Dutch Association of Industry-wide schemes (VB). Akkermans & Partners also offers pension education, as does Watson Wyatt and the other actuarial firms. Other pensions education providers include IRR, Euroforum and publishing firms such as Elsevier and Kluwer.

Netspar, the network for studies on pensions, ageing and retirement has just begun to offer an MSc programme in the Economics and Finance of Aging. It started in September, with 30 students doing the full programme - half of whom are non-Dutch - and others taking some courses from it. For example, the network says, nearly 50 students attended Introduction to Economics and Finance of Pensions and Aging taught by Lans Bovenberg and Sweder van Wijnbergen.

Now Netspar and the Universiteit Maastricht Business School (UMBS) are jointly setting up the Netspar-UMBS Academy, which will offer education on pensions and insurance. The academy will start in April 2007, and run three-day postgraduate modules, each addressing a specific theme and developed for either managers and policymakers at pension funds, insurance companies, public sector and supervisory boards or professionals from the financial sector, public sector and government.

The VB believes the level of education already available in the Dutch pensions field is enough for the industry’s needs, says VB spokeswoman Gerda Smits. But the sector’s needs are still changing, she adds, due to the new legislation and regulations coming in, including the Pension Act, the Pension Fund Governance code.

Any pensions education and training given to professionals and others involved in the industry should be, and is, independent of asset managers, she says. “The information given will be independent and there will be no product selling during the training,” she says.

Companies are taking the training of board members and trustees more seriously now, says Smits, as a result of the Pension Fund Governance code and the Pension Act, which make new demands of trustees and board members. Umbrella organisations VB, OPF and UvB are working on a set of requirements needed, she says, and these will be published in the first half of this year.


The code will put great emphasis on at least some of its members having specialist expertise in legal, financial, accounting and management areas. Already, there have been calls for the implementation of the pension fund governance principles to be made mandatory.

In the draft pension fund governance code, there is an explicit requirement for the chair of the governing body to make sure its members participate in an induction and training programme. He or she also has to ensure the members are provided with “appropriate, complete and timely” information they need in order to carry out their responsibilities properly

In Switzerland, pensions professionals can train for the federally-recognised qualification of Pensionskassenleiter at the Fachschule fuer Personalvorsorge in Thun in German-speaking Switzerland. Administrators need to complete a two-year course which consists of teaching sessions at weekends, and preparation.

The course covers legal basis, insurance technique, accountancy, investment of capital and running a pensionskasse. To qualify as a Pensionskassenleiter to manage a pension fund, candidates need to complete a further year learning about both management and investment.

Alternatively, pensions professionals can attend a course at the technical college in Lucerne or Zurich to qualify as a Sozialversicherungsexpert, and gain the federally recognised diploma.

In the UK, the route that most professionals take into the pensions industry is through study leading to the qualifications of the Pensions Management Institute (PMI).

The institute was formed in 1976 with the aim of “promoting professionalism among those working in
the field of pensions”, and it has a range of qualifications including the introductory Retirement Provision Certificate (RPC) and the Qualification in Pensions Administration (QPA), both of which are appropriate for pensions administrators.

The professional Associateship (APMI) is suitable for those training to be pensions managers. On top of these, the PMI also offers the Diploma in Pension Calculations (DPC), Qualification in Public Sector Pensions Administration (QPSPA) and the international qualification - the Diploma in International Employee Benefits (Dip.IEB).

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