UK pension growth efforts could fail unless policymakers engage directly with trustees of Defined Benefit (DB) schemes, according to research from LCP.
The report shows that while more than £1.2 trillion sits in DB pension schemes, investment decisions are made by fewer than 500 trustees, including over 150 lay members nominated by scheme participants. These trustees have significant control over assets but are largely absent from policy discussions.
LCP says this lack of engagement could undermine efforts to direct DB assets toward economic investment. Just 50 schemes hold half of all DB assets, despite there being more than 4,800 in total.
LCP’s research, based on interviews with professional trustees, individual trustees, and the Association of Member Nominated Trustees, shows that while trustees have significant influence over investment decisions and the long-term direction of DB pension schemes, this influence can vary.
Trustees said their voices are often overlooked, as policymakers tend to engage more with industry groups than with those managing the schemes. The majority of professional trustees said that lay trustees, nominated by scheme members, bring valuable perspectives to the table.
Most trustee boards operate by consensus, and while opinions on risk can vary, some trustees are more cautious, while others back reforms like surplus sharing. There’s a shared belief that diverse boards make better decisions and help prevent groupthink.
LCP partner Nathalie Sims says: “Following the Pensions Regulator’s recent announcements about its extension of oversight to the 11 largest Professional Trustee firms, trusteeship is back in the spotlight. Pension scheme trusteeship is an increasingly professional area, with trustee firms and independent trustees providing high levels of expertise and high-quality governance to schemes. But it is worrying that many feel that their voice is not being heard in the corridors of power and this omission must be addressed as a matter of urgency if we are to get the best out of the money invested in the UK pension system”.
LCP partner Lorraine Porter says: “Trustees are at the heart of the pension system, making decisions affecting the allocation of hundreds of billions of pounds of pension scheme assets. This includes the vital contribution of hundreds of lay trustees, nominated by scheme members, who bring unique insights and diversity of thought to trustee deliberations. At a time of huge change in the world of Defined Benefit pensions, with key decisions being made about the future of schemes, it is time that the trustee voice was put front and centre of policy making and regulation”.
LCP partner Steve Webb says: “The Government is keen to see pension scheme assets across the pensions landscape invested in a way which will generate higher levels of growth in the UK economy. But any reform will be ineffective if it is not grounded in a full understanding of the role and attitudes of pension scheme trustees. Most trustees are open to a conversation about making the most of the money held in their pension scheme, but policy makers need to understand the constraints within which trustees operate and do more to address their concerns”.
