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The changing nature of trusteeship

Thursday 5 June 2025

Nausicaa Delfas, CEO of The Pensions Regulator (TPR), gave a speech at PMI titled 'The changing nature of trusteeship'. The below speech may not be identical to the delivered version.

Key points

  • Trustees play a central role in the pensions system, ensuring the financial security of workplace savers.
  • As pensions change, so trusteeship should change too.
  • We do not need to re-invent the wheel – we will work with industry to bring trusteeship into line with other professions and corporate governance standards
  • Whilst maintaining a representation of member voice, and, crucially, preserving the unique powers of fiduciary duty.
  • As pensions change, so does the regulator – at TPR we are shifting our approach to a prudential style of regulation, to address risks not just in individual schemes but in the marketplace.  And we are acting to reduce unnecessary regulatory burden through focussed scheme reporting and digital and data capabilities.

Good morning.

Firstly, I must commend the PMI on the exquisite timing of this conference.

We were never going to be short of things to talk about, but the Pension Schemes Bill which is expected to be announced today is transformational for our industry.

It offers a once in a generation opportunity to build a pensions system fit for the future. A system which ensures the people we all work for – people who have worked hard and saved for decades – can have a comfortable retirement.

So, I am delighted to speak to conference about the Bill and the evolution of the marketplace towards fewer, larger pension schemes – and the impact of this on trusteeship.

Because our trustees lie at the heart of the pensions system. The decisions they take have enormous impact on the financial wellbeing of millions of savers.

And as the system grows and evolves, so must the nature of trusteeship. What worked in the past, may not work for the future.

So, I also want to discuss the key traits and behaviours we, as the regulator, believe should be present in all good trustee boards.

And, finally, I will lay out what we at TPR will do to make sure schemes always act in savers’ interests.

The Pension Schemes Bill

Along with many in the industry, the regulator has long argued that we must move from a workplace savings system to delivering a comprehensive pensions system.

To deliver the best value for money we called for change and wanted clear guardrails for that change.

Today, the government will provide both its vision for reform as well as the implementation schedule for the next five years.

This significant Bill will introduce measures that will radically reshape the market.

Measures which the government believes will be better equipped to deliver for savers, and potentially the UK economy too.

I am sure you will all be looking at the Bill in detail, but I wanted to pull out a few trailed reforms I think are particularly significant.

For defined benefit (DB) pensions, the Bill seeks to:

  • provide greater security for members in closed legacy schemes, by placing DB Superfunds on a statutory footing
  • enable excess surplus to be used productively, the Bill proposes moving the basis on which surplus can be returned from schemes to members and employers

And it accelerates the trends in the LGPS pension scheme towards fewer, larger investment pools at the same time as improving governance and fostering better strategic connections to local areas.

For defined contribution (DC), the Bill will mean that most savers will be in mega schemes which will benefit from excellent standards of governance and the broadest range of investment opportunities.

It aims to help people keep track of their pension through the default consolidation of small pots.

As we know, deciding how to access a pension can be stressful and complex for many. The new bill introduces a new guided retirement duty through which savers will be helped with difficult decisions and guided towards a range of clear, useful, and tailored products and services.

Running through all these reforms is a search for scale.

Government research suggests that achieving a scale of between £25-£50 billion may allow for more sophisticated investment governance practices, as well as in-house teams to manage a wide range of assets, including in private markets.

Our own recent surveys strongly indicate that larger schemes have better governance standards. The likelihood of schemes assessing trustee knowledge and understanding increased in line with size, and larger schemes are more likely to have a cyber incident response plan in place.

Whilst not complacent about the risks posed by scale, as regulator we welcome the potential for greater security and stronger financial outcomes for savers.

Trusteeship in a world of scale

But what does a changing pensions landscape mean for trustees?

Frankly, in a world of mega funds and superfunds we must re-evaluate how the role can best serve savers.

We don’t need to reinvent the wheel: after all, pensions are operating in a mature financial system.

But with responsibility for the financial wellbeing of millions of people in the UK, trusteeship needs to come into line with other professions and corporate governance standards.

Learning from others and applying the best of analogous regimes within our own regulatory sphere of influence must be the goal.

Yes, duties and expectations will grow, and trustees need to be agile and responsive to the changes and challenges, opportunities and threats.

Already, they must navigate an increasingly global investment market and take account of risks such as climate change and systemic geopolitical risks.  They must ensure operational and cyber resilience, and understand the role of AI in industry. They must also understand conflict of interest issues as corporate and commercial structures have changed.

This new Bill will demand more of them.

Guided retirement, for example, and surplus extraction may create new risks and place further duties on trustees.

We must jointly consider how trustee accreditation keeps up with the changing role, and how board effectiveness is appropriately monitored.

It is vital to establish now, what changes will be needed to enhance trustee capability and, how we as a regulator can help and guide.

So, what does a good trustee look like in the pension's world of tomorrow?

There are five key traits I believe are central to good trusteeship.

The first, is saver outcome focused.

Workplace pensions are unique in the landscape of broader financial services products because of the role of a trustee. And the many trustees I meet clearly demonstrate the desire to deliver for members.

They understand fiduciary duty lies at the heart of their role, acting with loyalty, honesty and good faith in the best interest of the saver.

It is, in fact, the law.

But more explicitly for a pensions trustee it also infers a duty of care in the administration of the scheme, a duty to take advice on technical matters and a duty to invest. It calls for high standards of service provision and high-quality investment governance.

So, how would I expect this to be demonstrated?

Well for investment governance – as set out in our General Code – it means trustees employing strong risk management controls.

We want and expect to see high standards of stewardship, with schemes following the principles outlined in the Stewardship Code, and for all trustees to consider and mitigate financially material systemic risks as part of good governance and delivering long-term returns.

But I also want all trustees to display a genuine understanding of what the right balance of risk and reward is for their type of member, and their type of scheme. We all know investment decisions are not risk-free. Therefore, they must be the product of informed decision-making based on good governance with a view to the best financial interests of members.

This is particularly important in DC default schemes – where around 94% of savers remain – because just as taking too much risk puts good saver outcomes in jeopardy, over-investing in low-risk, low return assets over the long term could deprive those savers of much needed retirement income.

To help make sure this does not happen, we want to see clearly defined objectives for savers which trustees regularly review by considering the likelihood of achieving those objectives through a comparison of real-world performance with forecasted models, and then adjusting their strategies.

As regulator, our new engagement practice with master trusts means we will challenge investment government processes through more focused, expert-to-expert meetings. The aim is to influence key decision-making in real time, improving regulatory compliance and, therefore, saver outcomes.

Later this year, ahead of the value for money (VfM) joint framework, TPR with the Financial Conduct Authority (FCA) will also launch a joint market-wide data collection exercise which will include asset allocation information in workplace DC schemes.

The exercise will run annually until the VfM disclosure data becomes available.

A voluntary exercise, we will ask for detailed asset allocation information from major DC schemes.

This will allow the market to start to understand the connection between value and asset allocation and returns and make more informed investment decisions for their kinds of savers.

Nausicaa Delfas speaking at PMI June 2025

The second trait of good trusteeship is constructive challenge.

We want to bring trusteeship into line with other professions and corporate governance standards, and today’s bill is a key stimulus for this.

Across the market, we have seen how quickly the trustee landscape can change.

Just a few years ago, who would have thought that just 10 trustee firms would govern more than a £1 trillion worth of assets?

But they do.

And whilst we welcome the skills and expertise brought by professional trustees, we must also ensure that any conflicts are managed and that decisions are always made purely in the interests of savers.

Some pension schemes are complex large-scale entities being run for profit. Others are run for the members but attached to large and complex companies.

Whatever the scheme, diversity of thought and challenge are fundamental to good decision-making. Savers are not a homogenous group and to effectively address their needs, it is vital to hear from an inclusive range of viewpoints and experiences.

I know the value of the member voice. Member nominated trustees, often supported by trade unions, or committees help bring that all important view from members to decision making. We need to build on this go further in terms of ensuring good governance at trustee boards.

The UK Corporate Governance Code sets out that non-executive directors are expected to serve no more than nine years to preserve their independence.

But how many trustees do you know have served longer than that? And what’s more, how many other appointments do they hold? If it’s more than five, do they actually have the capacity to fulfil the role adequately?

We are also increasingly seeing trustee models where the commercial model may present potential conflicts between the trustee’s responsibilities to the members and their relationship with the sponsoring employer or scheme funder.

In this environment – with long tenure, multiple appointments, and increasing potential conflicts, trustees, I expect you to be asking tough questions of yourself to make sure you can really bring challenge to 'group think'.

And to have thought about what happens after you leave, creating a succession plan so that when you leave no scheme specific knowledge is lost. Bluntly, if you were to fall under a bus tomorrow, are your savers going to be negatively affected.

For our part, we will work with industry and others to develop an assurance framework to ensure that trustee boards’ effectiveness is reviewed every two or three years.

We are also extending our supervision to build formal relationships with the largest professional trustee firms. Through this engagement we want to better understand and assess potential risks we have identified in certain areas, including relationships with the employer, profit and remuneration models, delegation of decisions, conflicts of interest and sole trusteeship. We will be testing resilience in this market.

And we will ensure that effective challenge stays at the core of good trustee decision-making.

The third trait, all trustee boards must be highly skilled and diligent.

If you were to ask an average pension scheme member – I think they would have a reasonable expectation that those looking after their retirement incomes were suitably qualified. After all, in some cases, they govern billions of pounds of savers money.

The PMI is an important ally when it comes to raising standards of trusteeship – but collectively we must do more to raise standards.

In other professions there is continuing development. That must also be the case for pensions trustees. Keeping up to date with developments in the market and in the profession is vital.

With the PMI, the industry and other interested parties, we will work to develop higher standards of accreditation for trustees.

We expect trustee boards to have a range of diverse experience and expertise to make good decisions on behalf of members.

There is no one-size fits all, and different kinds of schemes need different balances of experience and expertise.

For a master trust there may be many members in their twenties and a lifetime to build a pot. In such a case, in addition to core skills around investment management and operational resilience, I would suggest the balance of skills needed for a trustee board here might include expertise in member communications and new product innovation.

But different skills may be needed to govern a mature DB scheme as trustees make decisions on how best to secure their members’ benefits and for an increasing number of schemes deal with the surplus.

Building a trustee board with the relevant skills, whether they be investment, funding, administration or data will be key to achieving a great outcome for members.

Through our expanded supervisory approach, we will be making sure that all schemes meet the basics as set out in our general code. And we will check their broader governance is appropriate for their circumstances.

Fourthly, trustees must be collaborative but accountable.

Schemes are becoming complex entities.

There may be different actors who have influences on scheme strategy, different service providers (actuarial, investment, member communications for example), and a mixture of professional and lay trustees on a board.

Nonetheless, all trustees must understand that their duty of care and skill cannot be delegated or abdicated. They may well feel the need to rely on investment advisers or other third parties and have a duty to take advice when they don’t have necessary expertise – but ultimately the responsibility to savers rests solely with them.

Even if they don’t feel they have specific expertise in this area, we absolutely expect them to be able to challenge the advice they receive constructively and will look to see examples of them doing that – it cannot be, as we have heard, that a professional trustee did not think it was their job to challenge their advisors!

In this regard, administrators are a critical partner for trustees.

That is why we are expanding our Market Oversight approach to administration.

We have already engaged successfully with 15 administrators and looked particularly at financial sustainability, risk management, cyber resilience and technology and innovation.

We are considering the findings and plan to publish them in August. The next phase of our engagement with administrators will build on these risk areas and cover specific risk areas, including data quality so we can understand where the risks to savers lie.

We want to help and harness the collective buying power of schemes to effect change in the administration marketplace. So, we welcome feedback from trustees about the conversations they are having with administrators, and where they feel frustrated.

The fifth and final trait, is that trustees must be data-led.

To truly work well for savers, trustees need to be data-led. To ask the right questions based on suitable insights provided by quality data.

That is why raising data quality across the market is a key regulatory priority.

As you all know, millions of workers are about to become more aware of their pensions through the introduction of dashboards.

We know the scale of the task for industry, particularly as we still have major pensions schemes operating just off Excel spreadsheets and one in four schemes with some form of records in paper form or even microfiche!

With the dashboard deadline looming we’re keen to strike while the iron is hot to drive data improvements across the board.

Our approach over the next year will be two-fold:

  • First, making sure that trustees have the right data hygiene in place through our continuing data quality regulatory initiative, which will challenge hundreds of schemes who may be failing our expectations. This will also involve closer scrutiny of schemes’ operational resilience plans including cyber resilience.
  • Second, we want to work with trustees and the industry to drive the development and adoption of open data standards through the implementation of our Digital, Data and Technology (DDaT) and Data strategies.

As part of this work, we will form industry working groups and help market participants to learn from one another and spur on better practices.

We say this having seen the benefits of our own investment in digital and data capabilities. TPR has used AI over the past 12 months to support its regulatory functions and decision-making to better protect savers. This includes detecting pension scams, monitoring market trends, predicting pension scheme health, and managing website feedback.

We know how much more effective this is making us, and want the schemes and savers too benefit too.

Our next steps

The evolving pensions landscape places greater burdens on trustees. But what will we do to help you over the next few years?

We will be working closely with the government on their planned consultation on trusteeship and governance set to commence later in the year looking at the future regulatory environment to make sure it is fit for the future.

At the same time, we will be clearer about what we expect of you now, launching a new strategy to articulate our priorities and how we will seek to raise standards of trusteeship through our compliance and oversight approach with the market.

That strategy will be based on the five trustee traits I’ve laid out this morning; saver-focussed, open to constructive challenge, acts with skill and diligence, is collaborative yet accountable, and is data-led.

But we want to make your lives easier too. We are actively considering how we can reduce unnecessary regulatory load.

Already those of you from the DB world will recognise our shift in approach in support of the DB Funding Code. We expect around 80% of schemes to be able to meet our Fast Track approach, resulting in less contact from TPR and lower regulatory burden on schemes through simpler reporting.

Over the coming year we will also conduct a broad review of our scheme return and supervisory returns, to rationalise and remove asks of you which aren’t directly related to good saver outcomes. To focus our activity on where the greatest risk lies and let you focus on the task at hand – delivering for savers.

Because, ultimately, protecting and providing for savers is why we are all here.

And to meet their needs, and the requirements of today’s Pension Schemes Bill we will all have to adapt and evolve.

It is an incredibly exciting time for the industry. A time in which we must rethink what it means to be a trustee, an administrator and even a regulator.

With your help we can enhance the best of the past with the requirements of the future and ensure the financial security of millions of workers.

Thank you.

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