Ever since Robert Maxwell was found to have treated the Mirror Group pension fund as his own personal piggy bank, the government has insisted that schemes appoint member nominated trustees (MNTs) to improve scheme governance and ensure such fraud never happens again.
That was in 2001 and since then the role of the trustee has changed immeasurably. The advent of defined contribution funds, the increasing regulatory and governance burden, ever more complex investment strategies; the list goes on.
No wonder then that there has been a rise in the number of professional trustees appointed to support MNTS in their role.
However almost three-quarters (73 per cent) of incumbent professional defined benefit (DB) are planning to step down from the trustee board within the next three years.
Of those, more than a tenth (13 per cent) plan to exit their role in less than six months, while a further 37 per cent are planning their exit in seven to 11 months’ time. A fifth (22 per cent) plan to leave within one to three years. This takes the mean number of months in which DB pension trustees plan to step down from their role to 16 months – down from 20 months when the survey was last undertaken in 2022.
The figures come from research from Charles Stanley Fiduciary Management which reveals just under a third (31 per cent) of those throwing in the towel are motivated to do so by onerous reporting requirements.
Meanwhile more than a fifth (22 per cent) say the regulations are too burdensome, and the same number feel they lack the sufficient knowledge to carry out the role.
Bob Campion, Senior Portfolio Manager, Charles Stanley Fiduciary Management, says: “Pensions regulation is notoriously complex and continues to grow rather than become simpler. The responsibility for this lies squarely with tPR (the Pensions Regulator) who can do more to streamline the reporting requirement.”
Last November in his Mansion House speech, Chancellor Jeremy Hunt announced a review into whether pension trustees are “properly equipped, supported, and regulated to meet the demands of this role”.
“It is clear there is space for action to ensure that all trustees are able to work effectively. Every saver deserves to know their pension is being well looked after, no matter how small the scheme,” Hunt said.
The Department for Work and Pensions and tPR will create a register of trustees who are able to support schemes that “require additional support to fulfil their obligations”.
But whether this approach tackles the underlying reason that professional trustees feel overwhelmed to the point they are exiting the role is up for debate.
Further the Charles Stanley research suggests that unless younger members of the workforce are encouraged to rake up the role, there will be a significant gap left by those – 39 per cent – who are planning to retire.
Campion says: “Anecdotally we are seeing a noticeable growth in younger trustees – the main change needs to be structuring of the role as a first career rather than a career change option for experienced professionals.”
He concludes: “To avoid a sudden shortfall in professional oversight which would put people’s pensions and investments at risk, the industry needs to radically increase efforts to try to attract and retain the required influx of new talent.”
