Professional trustees have welcomed the move by The Pensions Regulator to extend its powers over UK professional trustee firms.
Last year, a survey conducted by LCP found that more than half of UK pension schemes had a professional or sole trustee and that almost half of the appointments were sole trustees.
The firms it surveyed had defined benefit pension scheme assets under management of around £1.2trn.
Recognising the rapid growth in the professional trustee market, TPR gathered information on the 11 biggest trustee firms to better understand their business, the risks and opportunities that arise and any conflict issues.
TPR found a variety of business models in the market and a significant expansion in the number of professional trustees – all of which brought different risks and opportunities to savers.
As a result, it is now formally extending its oversight of professional trustee firms, seeking to influence better outcomes for savers. This builds on its experience establishing relationships with eight of the largest commercial and non-commercial administrators in the market.
The framework was announced at the Trades Union Congress pensions conference in London on 2 April, where TPR’s chief executive officer Nausicaa Delfas said: “The professional trustee industry has experienced significant growth over the last few years, with more than half of UK schemes using a professional or sole trustee.
“Between them, just 10 firms govern more than a trillion pounds of savers’ retirement income.”
She continued: “As part of our new risk-based and outcome-focused approach to regulation, we are extending our engagement with these firms to identify and mitigate any risks to pension savers.”
TPR has also published a market oversight report exploring some of the areas where risks to saver outcomes could arise, including:
- relationships with employers;
- profit and remuneration model;
- sole trusteeship;
- in-house advisers;
- scheme decision maker.
TPR’s market oversight team will establish ongoing supervisory relationships with professional trustee firms, starting from the summer and extending its approach to cover the remaining firms by the end of the year.
The regulator said it wants to hear views from the industry and urged anyone with information or experience of the professional trustee market and any risks to get in touch.
Positive move
The move to extend the regulator’s oversight to professional trustee firms has been welcomed by many.
Adrian Kennett, managing director at Dalriada Trustees, said that beneficiaries of pension funds deserve the “highest standards” of governance, risk management and expertise, adding that professional trustees should be at the forefront of this.
He said: “We welcome the oversight that will be provided by TPR to drive up those standards right across the professional trusteeship market and to ensure best practice is adhered to. Highly skilled trustees with diverse backgrounds working within teams using robust processes can provide breadth and depth of experience across many pension disciplines. This ensures absolute focus on enhancing member outcomes.”
Andrew Bradshaw, CEO of Independent Governance Group (IGG), noted that as the UK pensions landscape continues to evolve and decisions become increasingly complex, professional trustees play a critical role in ensuring the good governance of pension funds.
He added that the industry already governs more than £1trn of assets and it is “right” that it is held to a “high bar” and keeps “striving to raise the standards of trusteeship and governance, which better serves pension savers and ensures their needs are met”.
“IGG has a long history of working hard to further strengthen governance standards, from leading the working group introducing the first set of standards for professional trusteeship through to Rachel Croft’s current role as chair of the Association of Professional Pension Trustees. We have invested heavily in developing effective internal controls and our Professional Excellence Committee has a broad remit to ensure that we always operate in line with best practice,” Bradshaw said.
He added that TPR has rightly identified particular areas for the industry that it would like to focus on.
He said: “We look forward to working with [TPR] on the extent to which such risks exist and how they can be both managed and mitigated. We are particularly keen to work with TPR to ensure that the practical application of the framework works alongside its other stated objective of encouraging innovation in the market, which is key to meeting many of the government’s, and savers’, objectives.”
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