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Member-nominated trustee appointments

Important

Early draft of the code of practice

This code is not in force yet. It is an early version for the new code of practice consultation.

To give us feedback on issues such as the design, usability and navigation of this code, email us at webfeedback@tpr.gov.uk.

You can also read more information about the consultation.

Published: 17 March 2021

The requirement

Some governing bodies are required to establish and implement arrangements that enable at least one-third of the trustees to be member-nominated trustees (MNTs). However, there are many exemptions to this requirement. Trustees should consider seeking legal advice where they believe an exemption may apply and record any conclusion reached.ME1, ME2, ME3

The cost and nature of MNT arrangements should be proportionate to the circumstances of the scheme. The arrangements should also include nomination and selection processes that are fair and transparent for all members of the scheme. Treating members fairly does not however mean that all categories of member have to be treated the same.

Governing bodies should have MNT arrangements in place within six months of a scheme’s start date. However, this period may vary according to the size, structure and circumstances of the scheme.

Note: If a scheme has a corporate trustee, the requirement is for one-third of the trustee board to be member-nominated directors (MNDs) based on the total number of company directors. For the purpose of this module, MNT can also refer to MND.

Where a scheme has corporate and individual trustees, each company should be counted as a single trustee for the purpose of determining the total number of trustees.

Expectations for member-nominated trustee arrangements

Governing bodies have a series of expectations and requirements they should follow when establishing MNT arrangements. They should document how the arrangements comply with these requirements. They may also wish to record the reasons for any decisions made while establishing the processes.

Nomination process

  • Arrangements must include a process for active and pensioner members, or any organisation that adequately represents these groups, to nominate potential candidates for MNT positions.
  • The process should include the eligibility criteria for prospective nominees, taking into account any legislative provisions that prohibit certain individuals from being a trustee. Read more in Recruiting to the governing body.
  • A non-member nomineeME4 must have the employer's approval to qualify for selection.
  • Governing bodies should discuss with the employer whether non-members will be eligible to be candidates.
  • Eligibility of non-members should be reflected in the arrangements as a criterion for nomination and selection.

Selection process

  • The selection process must include arrangements for determining who will be appointed as trustees when there are more nominations than vacancies.
  • When there are fewer nominations than vacancies, the governing body may still run a selection process if appropriate.
  • While methods of selection chosen may vary according to the circumstances of the scheme, they must include some or all of the scheme members.

The nomination and selection process should take place within six months of the requirement to appoint an MNT arising. Reasonable periods for completing the nomination and selection process will vary according to the size, structure and circumstances of the scheme.

If there are still unfilled MNT vacancies after the selection process, governing bodies must repeat the selection process at reasonable intervals. We consider a reasonable interval for repeating the process to be no more than three years from the end of an unsuccessful nomination process. 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 large number of redundancies), it should be done sooner.

Role of MNTs and reviewing arrangements

Governing bodies must not exclude MNTs from the exercise of any trustee functions solely on the basis of being an MNT. More information about our expectations for appointed MNTs can be found in the modules; Recruiting to the governing body, Working knowledge of pensions and Building and maintaining knowledge.

Governing bodies should document and periodically review MNT arrangements at least every five years. For schemes with larger memberships, or those with more categories of member, 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

Our expectations for communications to scheme members at each stage of the MNT process are detailed below. Governing bodies should use their established means of communicating with members and provide sufficient time for them to consider their nominations.

The nomination stage should include:

  • the number of MNTs the scheme is required to have and the current number of vacancies
  • an explanation of the role and our expectations of trustees
  • details of training that will be provided
  • any eligibility criteria
  • how to make a nomination and any time limits that apply
  • details of the selection process and what would happen if insufficient nominations are received
  • a contact for queries

The selection stage should include:

  • the outcome of the nomination stage
  • details for members involved in the selection stage of their next steps
  • the method of selection

Outcome:

  • an explanation of the process undertaken and details of any appointments that were made as result of this
  • where insufficient nominations were received to fill all vacancies, confirmation of when the process will be repeated

Glossary and legal references

Corporate trustee

A company which acts as a sole trustee for a scheme.

Member-nominated trustee (MNT)

MNTs are trustees who are nominated as a result 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.

ME1Sections 241(8) and 242(10) of the Pensions Act 2004
[Articles 218(8) and 219(10) Pensions (Northern Ireland) Order 2005]

ME2Regulations 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]

ME3Among 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]

ME4Sections 241(5)(c) and 242(5)(c) The Pensions Act 2004
[Articles 218(5)(c) and 219(5)(c) Pensions (Northern Ireland) Order 2005]