The Irish pensions regulator risks imposing “group think” on trustee boards if it pushes ahead with new trustee qualifications and should instead bring its proposals in line with the current draft of the new IORP Directive.
The Pensions Authority has been warned that the proposal risks driving away lay trustees who, according to the Irish Association of Pension Funds (IAPF), bring a sense of balance to trustee boards.
Instead, the trade body suggested limiting the requirements only to those trustees who are paid for their time, rather than those acting on a voluntary basis.
The comments come in reaction to a September consultation on trustee qualifications, in which the Authority set out how the revised IORP Directive would impact domestic regulation and asked how to structure a potential curriculum for trustees.
“We suggest,” the IAPF said, “that any mandatory qualification requirements should apply to the trustee group as a whole rather than to each individual trustee.”
It noted amendments made to the IORP Directive, after pressure from the UK and Ireland, that would only require a trustee board’s knowledge to be “collectively adequate”.
Jerry Moriarty, chief executive of the IAPF, noted that the changes risked a “mass exodus” of lay trustees.
“We do feel very strongly the lay trustees do have a lot to add,” he told IPE. “If everyone who is involved in running the pension scheme is paid to be there, then it does change the dynamics a bit.”
He questioned whether having purely professional trustees on boards led to better outcomes, echoing the IAPF’s assertion that there was no “body of evidence” pointing to an improvement.
Moriarty suggested the regulator “tread slowly” and said the industry was in favour of having trustees better equipped to deal with the challenges facing boards.
“But requiring them to all complete the same degree in trusteeship is going a bit too far at this point in time,” he said.
“If you are looking at any board – whether it’s for a company or a pension scheme – then one of the important things is to have diverse views and people who can ask tough questions and challenge.
“If everybody who has come through the same school, then you are just going to have a major group think, rather than people questioning and delving into things, looking at it from a different point of view.”
James Kavanagh, managing director of Trustee Decisions, agreed that lay trustees played an important role within schemes, calling their work “selfless”.
But he also argued strongly in favour of improving their level of knowledge.
“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,” he said.
“All of this requires courage by trustees, especially in the area of challenging their advisers.”