I am a new pension scheme trustee, what do I need to do?

Although you have six months to acquire the relevant trustee knowledge and understanding, you need to be equipped to be able to make any decisions that may arise in the meantime.

To do this effectively, all trustees must read the scheme’s trust deed and rules (in conjunction with pensions legislation) as these contain the rules that govern your scheme.

 You should also be familiar with:

•  the scheme booklet – the information you give to your members
• the report and accounts – information about the scheme, like the number of members and the funding position.

To help you understand these documents, and to acquire the relevant knowledge and understanding, the pensions regulator has produced free, online e-learning called the Trustee toolkit.

All trustees need to:

•  have an appropriate level of knowledge and understanding (TKU) about the scheme and issues like pensions law, investments etc
•  make sure processes (called internal controls) are in place to deal with issues like:
  • ensuring all contributions are made on time by the employer
  • conflicts of interest
  • poor investment choices and performance
  • inaccurate member data and poor administration generally
  • member complaints
• keep members up-to-date with appropriate information about the scheme and their pension savings
• have the necessary advisers in place to help with the many different and varied tasks required of the trustee board.

Trustees in a defined benefit (DB) scheme have a responsibility to ensure there is enough money in the scheme to pay members’ pensions as and when they need to be paid.

To see how much money is in the scheme, every three years trustees have to arrange for a ‘valuation’ to be carried out. This assesses the assets and the liabilities of the scheme. Trustees need to appoint a scheme actuary to carry out this process. This valuation must be submitted to the regulator if the scheme is not fully funded.

If the scheme does not have sufficient assets to cover all it owes (the liabilities), that is, there is a shortfall (a deficit), trustees must put in place a plan to fill the gap. This is a recovery plan. The recovery plan sets out how much will be paid into the scheme and over what period.

It is the trustees’ duty to agree the recovery plan with the sponsoring employer. This must also be submitted to the regulator by the trustees.

A DB trustee also has to be responsible for monitoring scheme investments and keeping an eye on the financial strength and health of the employer who is standing behind the scheme.

You can find more about your DB role and responsibilities in the Trustee toolkit.

In defined contribution (DC) schemes the individual member has a lot of decisions to make about the way they save and the way they turn their pension savings into an income.

Trustees have a responsibility to support their members in making informed decisions.

Trustees should:

• understand the investment options they offer members and make sure they are offering appropriate fund choices
• help members to understand that how much they receive from the scheme is linked to how much they pay in
• encourage members to obtain advice and provide as much support as possible
• provide timely and relevant information to:
  • prospective members about the scheme
  • current members about their savings
  • members approaching retirement about the options they have when they turn their savings into an income
• make sure that the charges paid by members represent good value for money.

You can find more about your DC role and responsibilities in the Trustee toolkit.