Arrangements for member-nominated trustee appointments

General code in force: 28 March 2024

1. Some governing bodies must establish and implement arrangements that enable at least one-third of their trustees to be member-nominated trustees (MNTs). However, there are many exemptions to this. Trustees should consider seeking legal advice where they believe an exemption may apply and record any conclusion reached^1,2,3.
2. The cost and nature of MNT arrangements should be in proportion to the circumstances of the scheme. The arrangements should also include nomination and selection processes that are fair and transparent for all scheme members. Treating members fairly does not, however, mean that all categories of members need to be treated the same.
3. It is good practice to consider how MNT arrangements can be designed to support applications and nominations representing the diversity of the scheme’s population – to encourage a wider and more representative pool of prospective candidates.
4. The governing body should have MNT arrangements in place within six months of a scheme’s start date. However, this period may vary according to the scheme’s size, structure, and circumstances.

Expectations for member-nominated trustee arrangements

5. The governing body should follow the law and its scheme’s governing documents when establishing MNT arrangements. The governing body should document how its arrangements comply with these requirements. They may also wish to record the reasons for any decisions made while establishing the processes.
6. Arrangements for the nomination of prospective MNTs:
   1. must include a process for active and pensioner members, or any organisation that adequately represents these groups, to nominate potential candidates for MNT positions.
   2. may include a process for deferred members to nominate potential candidates for MNT positions.
   3. should include the eligibility criteria for prospective nominees, considering any legislation that prohibits certain individuals from being trustees. Read more in Recruitment and appointment to the governing body.
   4. must ensure that a nominee who is not a member of the scheme has the employer’s approval to qualify for selection, where this is required by the employer⁴.
   5. Should, following discussions with the employer as to whether nominees who are not members of the scheme will be eligible to be candidates, set out the eligibility of nominees who are not members of the scheme for nomination and selection.
7. Arrangements for the selection process:
   1. must include arrangements to determine who to appoint as trustee when there are more nominations than vacancies.
   2. may provide that if there are fewer nominations than vacancies, the governing body may still run a selection process if they consider it appropriate.
   3. must include some, or all, of the scheme members, although the chosen methods of selection may vary according to the circumstances of the scheme.
8. The nomination and selection process should take place within six months of an MNT vacancy arising. Reasonable periods for completing the nomination and selection process will vary according to the scheme’s size, structure, and circumstances.
9. If there are still unfilled MNT vacancies after the selection process, the governing body must repeat the selection process at reasonable intervals – this should be no more than three years from the end of an unsuccessful nomination process.
10. If there has been a material change to the scheme’s circumstances and/or membership (for example, a bulk transfer in of new members or a significant number of redundancies), a nomination and selection process should be done sooner.
11. Where there are sustained difficulties in recruiting MNTs which are affecting the quality of governance, the governing body may wish to consider appointing a professional trustee, subject to the scheme’s governing documentation.

Role of MNTs and reviewing arrangements

12. MNTs have no additional responsibilities compared to any other trustee. The governing body must not exclude MNTs from the exercise of any trustee functions solely because they are an MNT. More information about our expectations for appointing MNTs can be found in the modules: Recruitment and appointment to the governing body, Knowledge and understanding and Governance of knowledge and understanding.
13. The governing body should document and review the scheme’s MNT arrangements at least every five years. For schemes with larger memberships, or those with more categories, a review every three years is more appropriate. Earlier reviews should also be considered if there is a material change to the scheme’s circumstances and/or membership.

Communicating with scheme members

14. Our expectations for governing bodies communicating to scheme members at each stage of the MNT process are detailed in paragraphs 15 to 17. The governing body should use their established means of communicating with members (see also General principles for member communications) and provide enough time for them to consider their nominations.
15. The nomination stage communication should include:
    1. the number of MNTs the scheme needs to have and the current number of vacancies
    2. an explanation of the role and what we expect of trustees
    3. details of training that will be provided
    4. any eligibility criteria
    5. how to make a nomination and any time limits that apply
    6. details of the selection process and what would happen if not enough nominations are received
    7. a contact for queries
16. The selection stage communication should include:
    1. the outcome of the nomination stage
    2. details for members involved in the selection stage of their next steps
    3. the selection method
17. The outcome communication should include:
    1. an explanation of the process and details of any appointments that were made as a result of this
    2. where not enough nominations were received to fill all vacancies, confirmation of when the process will be repeated

Glossary

Corporate trustee

A company that acts as a trustee for a scheme and, in some cases, may be the sole trustee.

Member-nominated trustee (MNT)

Trustees who are nominated because of a process involving all active and pensioner members of a scheme or an organisation that adequately represents these groups, and that are then selected by a process involving some, or all, of the scheme members. MNTs should be taken to include ‘member-nominated directors’ (MNDs) of corporate trustees.

Legal references

¹ Sections 241(8) and 242(10) of the Pensions Act 2004 [Articles 218(8) and 219(10) Pensions (Northern Ireland) Order 2005]

² Regulations 2 and 3 The Occupational Pensions Schemes (Member-nominated trustees and directors) Regulations 2006 [Regulations 2 and 3 The Occupational Pensions Schemes (Member-nominated trustees and directors) Regulations (Northern Ireland) 2006]

³ Among the exemptions are schemes where all the trustees or directors are independent, as defined in section 23 of the Pensions Act 1995 [Article 23 of the Pensions (Northern Ireland) Order 1995]

⁴ Sections 241(5)(c) and 242(5)(c) The Pensions Act 2004 [Articles 218(5)(c) and 219(5)(c) Pensions (Northern Ireland) Order 2005]