Professional trustees, who sit on the majority of UK pension boards, are to be held to an increased level of scrutiny after a panel of industry experts published the standards it expects them to uphold.
This week, the Professional Trustee Standards Working Group unveiled how it planned to improve governance on pension boards across the country through the approach and actions of this group.
The panel included senior members of the pensions industry, including representatives from the Association of Pension Trustees, the Pensions Regulator (TPR), the Association of Corporate Trustees and the Pensions and Lifetime Savings Association (PLSA).
David Fairs, executive director for regulatory policy, analysis and advice at TPR, said: “Professional trustees are a valuable part of pension scheme boards, bringing vital knowledge and experience, which helps to ensure schemes are well run and provide good outcomes for members.”
Professional trustees have significant influence in how UK schemes are run. In 2017, an annual survey by the PLSA showed some 51% of defined benefit (DB) and defined contribution (DC) schemes had independent trustees on their boards.
TPR’s own figures showed similar numbers from the same year: 50% of DB and 78% of DC schemes had at least one professional trustee.
Following the publication of the new standards, professional trustees will have to demonstrate they meet minimum requirements covering fitness and propriety, governance skills, ongoing professional development and managing conflicts of interest.
The Association of Professional Pension Trustees Council will take on responsibility for maintaining the standards and will also oversee the accreditation framework, which will be run by the Pensions Management Institute. The framework is expected to be launched later this year.
Fairs said the robust accreditation framework would help ensure professional trustee appointments were high quality and met the standards TPR expected.
There are additional standards for professional trustees who chair or are the sole trustee on a board.
Laura Andrikopoulos, head of governance at Hymans Robertson, said: “Sole trusteeship can, in the right circumstances, be a very effective model, but the current governance guidance from TPR was written with collective boards in mind.
“This additional guidance draws increased attention to the unique characteristics of this model and bolsters the governance requirements; it should improve current practice in this area.”