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New research published on trustee landscape

Ref: PN15-46
Wednesday 28 October 2015

The Pensions Regulator today published new research on the skills and knowledge of pension scheme trustees and their boards in the context of major industry reforms.

View the trustee landscape quantitative research.

While the regulator already provides education, guidance and tools to help trustees perform their roles, today’s research is part of ongoing work with the industry to consider what more can be done to improve outcomes for savers and clarify duties for those running or supporting schemes.

By publishing the research, the regulator intends to stimulate constructive debate about how it, Government and regulatory bodies, and the pensions industry at large, can raise standards sufficiently to increase confidence amongst consumers that their retirement savings are in high quality, well-run schemes.

A survey among 800 trustees of defined contribution (DC), defined benefit (DB) and hybrid schemes was commissioned to better understand their ability to fulfil governance and administration roles and scrutinise the quality and value for money of their advisers, administrators and investment managers.

Headline findings from the quantitative research show that larger schemes are more likely to be well governed than small and medium schemes. Larger scheme trustees are more likely to have received training, have greater access to advisers and spend more time on their duties. The findings also suggest that, in general, DB schemes are better governed than DC schemes, and schemes used for automatic enrolment are more engaged.

Other headline findings include:

  • Schemes with only professional trustees were more likely to be well run, for example in their ability to assess the value for money of investment advisers. Small schemes were less able to afford advisers and were less able to challenge their advice. Overall the majority of trustees rarely disagreed with their advisers.
  • Schemes used for automatic enrolment were more engaged with scheme governance and offered more formal training to trustees. The regulator supports this, in line with its recommendation to small employers preparing for automatic enrolment to choose a high quality large scheme such as a multi-employer master trust or a group personal pension (GPP).
  • While trustees almost universally believed that they had sufficient training opportunities, only half of schemes reported that any of their non-professional trustees had undertaken formal training in the last year.

Lesley Titcomb, Chief Executive of The Pensions Regulator, said: “As we and the industry work to create better outcomes in later life for workplace savers, it is only right that we increase our focus on the competency and capability of trustees and the structure of trustee boards.

“All trustees, some of whom are lay people with very little pensions experience, are required to do an increasingly complicated job, and so we are asking how we can further support trustees in fulfilling their important role.

“Our latest research gives us a better understanding of the competence of trustees and their own perception of the areas in which they need to develop their skills and knowledge. While many are doing a good job, there are some concerning findings, such as gaps in investment knowledge and the confidence to apply such knowledge, so we need to do more work to decide how best to address this.

“I want to have an open debate with the industry about what we all think an effective 21st Century trustee should look like, and how we get there.”

To explore key issues on the effective operation of trustee boards in more depth, the regulator is undertaking more qualitative research and analysis, focussing on areas such as the structures and processes that promote the effective operation of trustee boards, particularly on the role of the Chair, and the best way to deploy training and support tools to achieve effective trusteeship across schemes of all sizes and benefit structures.

Next year the regulator will set out what it believes an effective 21st Century trustee looks like and what it will do to further support trustees.

The regulator already provides free online learning for trustees in its Trustee toolkit and has published guidance and tools on issues such as covenant and investment strategy. A revised code of practice on DC governance and administration will be published for consultation later this year.

Editor's notes

  1. Other research findings include:
    • Half of schemes report that all trustees meet our minimum standards for knowledge. But 15% of schemes indicate that no trustees meet them, or have not heard of the regulator’s Trustee Knowledge and Understanding (TKU) code of practice.
    • Over two thirds (69%) of lay trustees on trustee boards in large schemes claimed to meet the standards set out in the regulator’s TKU code of practice. Among small schemes only 38% of lay trustees reported that they meet this standard, and 51% in medium schemes.
    • On average, the amount of time spent by a trustee on their duties is nine days for small schemes, 12 days for medium schemes and 16 days for large schemes, the survey found. But around half of small scheme trustees spend less than five days on their duties.
    • When compared to DB and hybrid schemes, DC schemes spend less time on trustee duties and that it is less likely that their non-professional or lay trustees have a level of knowledge and understanding that meets the standards set out in the TKU code.
    • The greatest knowledge gap identified by trustees the disparity between what they felt they needed to know and what they actually knew was around pensions investment.
    • The lowest knowledge score overall was for knowledge of pensions law.
    • Trustees reported their lowest levels of confidence related to the ability to assess the value for money of their external advice and services.
  2. A total of 816 interviews were completed with trustees of DB, DC and hybrid schemes with 12 or more members, including schemes that were open, closed to new members, paid up and winding up.
  3. The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the employer’s plans for sustainable growth (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

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