The Department for Work and Pensions (DWP) has found that while trustees are well-supported and knowledgeable they could benefit from more support, guidance and training.
Between July and September the DWP consulted on whether pension trustees work effectively and are supported when making decisions in the best interests of pension savers.
The consultation focused on three areas:
- trustee skills and capability, seeking views on the current landscape of trustee skills and capability as well as gathering evidence to inform potential policy options around trustee registration, accreditation requirements, and professionalism;
- the role of advice, seeking views on whether those who advise trustees are appropriately regulated, and suitably equipped to help trustees make informed decisions;
- barriers to trustee effectiveness, gathering evidence on whether the current framework in which trustees work, including the understanding of fiduciary duty, is a barrier to making investment decisions in the best long-term interest of savers.
The DWP received 81 responses to the call for evidence, which suggested that the majority of trustees are well-supported, knowledgeable, and hard-working.
However, the DWP said that it is “clear” there is space for action to ensure that all trustees are able to work effectively, and that others who make key decisions for pension savers do so based on the best possible long-term outcomes for savers.
Based on the findings, the department said that trustees and others would benefit from more support, guidance and training.
However, it pointed out that it has also become clear in the responses that one of the key barriers to achieving better long-term outcomes for pension savers is a “damaging and continual focus on cost and minimising all risks throughout the pensions industry”.
It said that in addition to ensuring trustees have the right support in place to consider investment decisions effectively, there needs to be a mindset shift for trustees, advisors, and employers that achieving the best outcomes for pension savers should be at the forefront of their decision-making including a holistic consideration of value.
The findings also added that The Value for Money framework, once implemented, will help to shift this focus, but trustees, advisors, and employers should be taking action now to ensure that they are not focusing on cost at the expense of value.
It proposed a number of areas where action needs to be taken now including:
- supporting the Pensions Regulator (TPR) to put in place a trustee register;
- accreditation of professional trustees;
- updates to TPR’s investment guidance and trustee understanding of alternative investment;
- engaging with employers selecting pension schemes.
Paul Maynard, minister for pensions, said: “We know there has been extensive focus on cost across the pensions industry.
“The Value for Money framework will shift that dial to best value, not simply low cost. However, it is not just trustees, schemes and advisors who must consider value. The role that employers play in selecting a pension scheme is a decisive one when it comes to the investment options trustees are then able to pursue,” he said.
Maynard said that “to complement the Value for Money framework, we will work with TPR to produce additional information for employers to help them select a scheme based on value, not just cost.”
Read the digital edition of IPE’s latest magazine