The former head of the UK’s pensions regulator has clashed with his successor over the need for professional trustees on pensions boards.
Bill Galvin, now chief executive of the Universities Superannuation Scheme (USS), spoke of the need for greater professionalism on trustee boards when asked which single change he would force through to improve outcomes for defined benefit (DB) schemes.
Speaking at the National Association of Pension Funds annual conference, Galvin said the result of the industry being honest about the level of knowledge required from trustees would be “revolutionary” and questioned why “well-meaning amateurs” were still members of boards.
His comments come the day after Lesley Titcomb, Galvin’s successor as chief executive of the Pensions Regulator (TPR), questioned whether the UK should follow the Netherlands and Ireland in setting or considering mandatory training and qualification standards.
Titcomb defended the regulator’s current approach to trustee education, which sets out a minimum level of knowledge required from all trustees, and distanced herself from the notion of greater training.
“We would run the risk of struggling even more to attract good lay trustees if we were to introduce mandatory qualifications for everybody,” she said.
The new chief executive, however, did highlight TPR surveys that found schemes chaired by professional trustees were better administered and asked whether that warranted closer inspection.
Galvin, for his part, likened the tasks facing trustees to decisions made by the Bank of England’s monetary policy committee and said they faced the challenge of dealing with “complex” financial engineering and capital structure problems.
“That’s a meaty role, isn’t it?” he asked. ”The qualifications for that role must be enormous. The bar must be set very high, [and] that role must have a very high status.
“Well, I guess in some places it does, but in a lot of places it’s well-meaning amateurs, time-conflicted, without adequate training, put together with some utterly conflicted and time-limited executives, sprinkled with a few professionals and a regulator looking over the shoulder.”
He said the industry dealt with the problem by outsourcing responsibility to the consultancy industry.
“If we want DB done properly,” he said, “it should be about putting responsibility into the hands of people who can make these judgements and run these institutions as they should be run, and that’s what members are due.”
The Irish regulator’s suggestion that greater training would be required was not warmly received by the Irish Association of Pension Funds, which warned that it risked “group think” among trustees.
The Dutch regulator, meanwhile, has imposed a number of rigorous checks for members of pensions boards that the industry previously warned could require the sector to draw on foreign experts to meet requirements.