2. Clear roles and responsibilities

In practice, pensions are increasingly complex. You need to be clear on your objectives and to focus your time on the areas that have the biggest impact on achieving those objectives.

This means focusing on strategic issues and considering whether to delegate some day-to-day activities and decision-making.

As a trustee you are accountable for operations and activities, even where you have delegated responsibility to third parties or others in-house. So you need controls in place to monitor and make sure that all the activities you are accountable for are delivered.

Being clear on the roles and responsibilities of all the main participants involved in running your scheme is essential. It will help the board to:

• respond to important issues and make decisions effectively
• operate efficiently and free up time to focus on strategic priorities
• monitor and oversee the main scheme activities effectively, including those delivered by third parties such as risk management, administration, investment and member communication

In accordance with trustee powers under the scheme rules and documents, the board should decide:

• the appropriate governance structure for the scheme, proportionate to your scheme’s risk and complexity
• what matters are reserved for the trustee board
• what can be delegated, for example to sub-committees or working groups

For delegated matters you should decide and document how decisions are made and escalated and who does this. You should also decide and document what should be reported to the board, who does this and how.

You should have clear contractual terms (where appropriate), terms of reference, tables of accountabilities and delegated responsibilities, and service level agreements. This will help everyone understand what their role is and ensure the efficient flow of information between key players.

Download example terms of reference for trustee boards and sub-committees (PDF, 47kb, 6 pages).

Role	Main responsibilities
Trustee	Run the scheme in the best interests of all members including deferred members, pensioners and other beneficiaries in accordance with the scheme documentation. Develop and maintain effective governance and internal controls to deliver investment (and funding for defined benefits), administration and communication activities. Decide what help to get and what to delegate. As a trustee board, make decisions and set the scheme’s objectives and strategy. Effectively monitor and oversee advisers and those carrying out scheme activities. Foster an open and constructive relationship with employers to understand their views and risks.
Chair of trustees	Lead and support the board. Ensure collective competence of the board with appropriate governance processes in place. Make sure meetings and scheme business are run efficiently with trustees, advisers and service providers who participate effectively.
Professional trustee	Run the scheme in the best interests of all members including deferred members, pensioners and other beneficiaries in accordance with the scheme documentation. Develop and maintain effective governance and internal controls to deliver investment (and funding for defined benefits), administration and communication activities. Decide what help to get and what to delegate. As a trustee board, make decisions and set the scheme’s objectives and strategy. Effectively monitor and oversee advisers and those carrying out scheme activities. Foster an open and constructive relationship with employers to understand their views and risks. Provide professional expertise and ensure good governance.
Adviser, eg investment consultant, actuary, covenant adviser, lawyer	Provide clear and relevant advice focused on areas that have the most impact for schemes. This includes scheme strategy, performance and governance, and helping trustees to comply with legal and regulatory requirements. Help trustees to run schemes effectively, offering feedback and challenge. Co-operate with other advisers.
Service provider, eg administrator, fund manager, software provider	Professionally deliver day-to-day business and operations for the scheme either as a third party or in-house.
Scheme manager / scheme secretary	Work with the trustee board to make sure the scheme is efficiently and properly run, members’ benefits are secure and oversee day-to-day activities (manager) or support efficient and effective governance (secretary).
Sponsoring employer	Establish the scheme and appoint trustees. Support the board by providing resources, time and training needed to govern the scheme well. Pay contributions to the scheme. Collaborate with the board by providing views and discussing risk where schemes fund defined benefits

Poor behaviour

Lack of commitment from board members

Some trustees are not committed to their role. They are required to be on the board due to their job role. They do not seem to read papers, rarely take part in discussions and often miss board meetings.

One trustee often argues the position of the sponsoring employer. They fail to understand that they are there to act in the best interests of all members. They are not available to carry out scheme business or have discussions outside the meetings they do attend. The scheme is missing out on the knowledge and experience these trustees should bring to the board.

Failing to oversee scheme operations

The trustees notice they are dealing with increasing numbers of complaints about administration errors that are taking up the majority of trustee meetings.

The board deal with each issue as it arises. They do not have clear contractual relationships or service level agreements in place or receive regular reports on the scheme’s administration. These would enable the board to identify systemic issues and areas for improvement.

The board don’t have a sub-committee to consider administration matters and they do not delegate administration tasks. They are also failing to oversee the scheme’s administration services. The resulting issues are affecting members and leading to complaints. This could lead to significant costs and losses because members are receiving the wrong benefits or are relying on incorrect information for their retirement planning.

Inefficient governance

The board struggle to get through the agenda at each meeting. They have too much business to deal with and cannot spend enough time on key risks and issues. They have no sub-committees and do not delegate activities so they attempt to deal with all scheme business at trustee meetings and run out of time to discuss matters.

The board fail to discuss a member’s transfer valuation, causing a delay until the next board meeting. In the meantime the member’s pot reduces in value as a result of investment performance. The member complains to The Pensions Ombudsman who decides the trustees’ poor governance amounts to maladministration and has led to a loss for the member and orders the trustees to pay compensation.

Poor meeting management

The chair allows a few vocal trustees to dominate discussions. The other trustees are not asked to contribute. There is no time available for their input as the chair has not allowed enough time for agenda items. The board is missing out on some trustees’ perspectives and expertise, reducing the quality of their discussions and decisions.

Good behaviour

Motivated trustees

The trustees really want to be on the board and are motivated to do the role. They are there for all beneficiaries. They do not represent the interests of any particular group although they may be able to offer particular perspectives, such as member-nominated trustees. They consider all members and beneficiaries (active, deferred and pensioner) when making decisions and setting strategy.

The trustees engage outside of their formal meetings. They talk through issues and have discussions with employers, advisers and service providers to the scheme. They help to manage the scheme’s business effectively.

Improved delegation and member experience

The trustee board has service level agreements with their administrator. They receive a report at each trustee meeting and the lead administrator attends in person to discuss anything that arises.

The board has delegated the use of trustee discretions (decisions the trustee has the power to make) to the scheme’s administrators. The administrators can exercise these discretions efficiently, without the need always to defer consideration until the next trustees’ meeting. This leads to swifter service and improved member experience.

Efficient investment governance

The scheme has a complex investment strategy and the trustees need to oversee a number of managers across their funds. The trustees review their investment governance and decide the complexity of their investment strategy means they should set up a sub-committee to focus on investment matters.

The trustees consider their powers under the scheme rules to establish a sub-committee. They then draft clear terms of reference that include powers and responsibilities delegated to the sub-committee and escalation processes. The trustees update the scheme’s accountability matrix, setting out the new delegation of powers. They annually review the effectiveness of the sub-committee.

Integrated governance in a defined benefit scheme

The funding, risk and investment committees produce a consolidated joint report, put together by the actuary. Actuarial, covenant and investment consultants set the scene with a short report followed by debate. This allows trustees to make complex decisions in a joined-up way, considering risk and impacts.

The committees have ongoing responsibility for each area and take an integrated risk management approach, rather than just thinking about things once in a three-year cycle.

• Do you make sure everyone involved in running your scheme has a clear understanding of their role and the roles of the other key participants in your scheme?
• Do you delegate activities for your scheme? Have you set this out clearly and documented what is delegated and the governance structure?
• Do you monitor delegated activities? How are things escalated to the board? Do you have the right structure in place to ensure effective scheme operations?
• Do you have a documented process that enables you to appoint a chair without delay? Does this take into account the leadership qualities of candidates?

• Roles and responsibilities
• Trustee board: guidance on the role of the chair and scheme secretary, and governance structures including sub-committees (this guide has been drafted for schemes providing money purchase benefits, but others may find it useful)
• Working well with advisers, providers and employers (this guide has been drafted for schemes providing money purchase benefits, but others may find it useful)