The Association of Professional Pension Trustees (APPT) has launched a new code of practice which sets out rigorous standards for professional trustees carrying out sole trustee appointments.
The code of practice for Professional Corporate Sole Trustees (PCSTs), which comes into force on 1 January, discloses a set of governance and risk controls that sole trustee firms must comply with to ensure that scheme members’ interests are fully protected, the APPT announced today.
These controls include a requirement for at least two accredited professional trustees to be involved in PCST decision-making processes, as well as new measures to ensure that PCSTs assess whether they should report to The Pensions Regulator (TPR) if they are removed, or resign, from an appointment as a result of the sponsor company’s actions.
The code, which will be officially unveiled at the APPT’s annual general meeting on 27 October, reinforces the APPT’s existing professional standards code, which all accredited professional pension trustees must follow.
Developed in consultation with TPR, the PCST code sets out how accredited professional trustees should ensure that their firms adopt robust governance protocols to manage potential conflicts of interest for PCST appointments and maintain independence from the sponsoring employer, APPT said.
The code also asks firms to maintain due diligence procedures around PCST appointments, as well as putting in place measures to document how adviser appointments are made fairly and ensure that consideration is given to ensuring diversity and inclusion in decision-making processes.
Nigel Hill, APPT council member and chair of the APPT’s sole trustee sub-committee, said: “For the first time we have a clear benchmark against which regulators, advisers and sponsors can measure the performance of sole trustees.”
He added that from now on, only trustees signing up to the new code should be appointed as sole trustees.
Nita Tinn, APPT’s chair, said: “This new code will ensure that professional trustees operating as sole trustees do so to the highest standards. When administered under our rigorous code of practice, the APPT believes that PCST appointments will raise standards across the industry, and we urge sponsors appointing sole trustees to make sure that those they appoint are accredited professional trustees and adhere to the code.”
David Fairs, director for regulatory policy, analysis and advice at TPR, said it was important for pension funds with sole trustees continue to have high standards of governance and decision making.
“The industry code sets out the additional practices and qualities needed of sole trustees which build on the professional trustee standards”
David Fairs, TPR
“The industry code sets out the additional practices and qualities needed of sole trustees which build on the professional trustee standards,” he said.
Shehzad Ahmad, a trustee director at Ross Trustees and the lead for the delivery of its sole trusteeship offering, has also played a central role in the creation of the code.
“The Code provides a clear framework for best practice. It outlines how sole trusteeship service providers need to evidence robust governance structures, as well as the necessary depth of resource, to deliver optimum outcomes for all stakeholders,” Ahmad explained.
“Professional corporate sole trusteeship is ideally delivered by a broad team of pension specialists drawn from diverse backgrounds and disciplines. This is important as it provides all parties with the reassurance that key decisions are made in an informed, balanced and impartial way and that the necessary checks are firmly in place,” he said.
Approximately a third of Ross Trustees’ appointments are as sole trustee and Ahmad believes the model will become an increasingly attractive option for employers as they contend with the challenges of the COVID-19 crisis, as well as the increased demands placed on lay trustees.
“It is, however, important to note that a sole trustee model may not be suited to all circumstances or clients. There is real value in the co-trustee model in numerous instances and this model will remain valid for many employers and their pension schemes,” he added.