Over two-thirds of corporate sponsors of defined benefit (DB) schemes expect to increase their use of professional trustees in the future, according to a survey by Hymans Robertson.
The research also found that 70% of companies expect to review their trustee boards at least every six years or less.
Hymans Robertson said that this is welcome as schemes will need boards with an expert skill set to meet the expectations of The Pensions Regulator’s new General Code, and the evolving sophistication of engame strategies.
The new General Code was published by the regulator earlier this month, bringing together 10 existing codes into one set of clear and consistent expectations.
In addition to the existing codes, TPR has also added fundamental new requirements including modules covering cyber controls, pension scams, and climate change; and relaxed the expectations around the timing for the preparation and delivery of the Own Risk Assessment.
Clare Kember, trustee director and head of outsourced governance services at Independent Governance Group, believes that the changes brought in by the General Code pose a risk that in-house teams could find themselves swamped by the combined weight of the guidelines and may need additional support to ensure compliance.
She said: “Our research of the skillsets required by the modern pensions manager shows just what a demanding role it is, with the breadth of skills sought after ranging from interpersonal and communication skills, to financial and legal expertise.”
She added that in-house teams are already expected to juggle a vast array of tasks and reporting responsibilities in a complex landscape.
“Emerging priorities and threats like sustainability and cyber-security have made the scale of challenge even steeper. We are seeing pensions play an increasingly central role in corporate decision making, so companies shouldn’t be afraid to turn to external expertise and specialist support to help navigate these changes,” Kember said.
Going forward, Hymans Robertson expects schemes to focus on governance models, as a result of these changes, utilising more specialist skills set and trustees with operational experience in delivering complex projects such as buy-in to buyout strategies.
Leonard Bowman, head of DB endgame strategy at Hymans Robertson, said: “It seems clear from this research that the role of professional independent trustees in UK retirement provision will be a much more dynamic aspect of the future management of DB endgames, which could lead to positive change and improved outcomes for scheme members.”
He added that whether managing DB endgame strategies, open DC trusts or new forms of retirement provision, the role of trustees in UK retirement provision will remain central for many years to come.
“It feels like this may become a much more dynamic aspect of the future, if companies follow through on their intention to regularly review their trustee boards and, in some cases, those reviews lead to change,” he continued.
“Not only can we expect greater use of professional trustees, but how companies evaluate their professional trustees is also likely to evolve and become more sophisticated,” Bowman said.
He added that companies have standard governance timetables for reviewing their advisors but it remains to be seen whether their professional trustees will be integrated into this cycle in the future.
If they are, he said, we could see the development of more sophisticated corporate objectives and measures for their professional trustees, which could in turn lead to evolution in the professional trustee market.
He added: “A culture of strong scheme and corporate governance are important to ensuring good member outcomes and would therefore be welcome.”
Hymans Robertson findings are in line with those of LCP. In a report published last September LCP said it saw 12% increase in the appointment of professional trustees among UK pension schemes in the year leading to June 2023, meaning that half of UK schemes rely on professional trustees.
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