An Association of Consulting Actuaries’ response to the Department for Work and Pensions consultation on trusteeship and governance in trust-based pension schemes has highlighted areas such as conflict of interest concerns for professional trustee firms.
The response also argued against increasing requirements for the appointment of lay trustees.
The response claimed that conflicts of interest can arise for professional trustee firms, both in terms of the appointment of connected firms and from the employer’s power to appoint or replace a professional trustee. If left unchecked, the ACA claimed that this conflict could become increasingly relevant when trustees have increased powers to distribute surplus to the employer.
Stewart Hastie, chair of the ACA, says: “We would not want to see a change to the balance of power impacting employer appointments of trustees. However, we suggest that consideration should be given to a more formal process for appointment – including notification to the Pension Regulator where a professional trustee or Professional Corporate Sole Trustee is being appointed or replaced.”
On the topic of mandatory minimum standards for scheme administrators, the ACA response claimed that while there were potential benefits in terms of raising standards and minimising undue delays, there was also reasonable grounds for complex cases to take longer, and arbitrary deadlines may influence behaviours in unexpected ways.
ACA Pension Schemes Committee Chair, Peter Williams, says: “We have a strong view that the requirements for lay trustees should not be raised, as this would make it even more difficult to attract candidates to these key positions.
“It is the trustee board as a whole that needs to have the appropriate skills. We think diversity of trustee boards is very important and lay trustees, including member nominated trustees, play an important role in bringing a range of experience and perspectives to trustee decision making.”
The ACA instead supports maintaining current skill requirements at the board level rather than for each individual lay trustee.