Professional trustee firms have welcomed the Pensions Regulator’s plans to enhance oversight, which aims to uphold high standards of professional conduct.
But there is a call for the regulator to assess the overall burden of regulatory compliance and to consider proportionality based on the specific circumstances of various schemes.
At the PLSA conference this week, TPR announced plans to increase its oversight by strengthening relationships with 10 of the largest professional trustee firms to ensure good governance and address risks like conflicts of interest and ownership structures.
It has also launched an innovation hub to support new industry models that prioritise savers’ interests, reflecting a shift toward a market-facing, risk-based regulatory approach.
It says: “We will be establishing relationships with the 10 largest trustee firms. We want to understand good practice but also to identify risks in areas such as ownership structure, skills and experience, diversity, equality and inclusion, conflicts of interests, and fees.”
Future plans for TPR centre on larger, well-managed schemes, innovation, and member protection. The organisation will use a risk-based approach to bring about a more efficient pension system.
The professional trustee industry has experienced significant growth, with over half of UK pension schemes now utilising a professional or sole trustee, according to the fourth annual LCP survey. This growth reflects increasing demand for support on trustee boards across various sectors, alongside service expansion, strong recruitment, and expected M&A activity.
LCP partner and head of strategic pensions Nathalie Sims says: “The announcement by TPR that they plan to extend its oversight to Professional Trustee firm is a change in direction; from engaging with individual trustees to engaging directly with the top 10 firms.
“LCP’s Professional Trustee survey included questions directly from TPR on exactly this matter. The firm’s responses was lukewarm when it came to supervision although the majority welcomed a direct dialogue with TPR to better understand what good practice looks like.
“Some of the firms have recently hired individuals directly from TPR who will undoubtedly be supporting the new interactions. We see this as a continuation of the change in strategy of TPR and look forward to seeing the results of their findings.”
Capital Cranfield MD Harus Rai says: “We welcome any initiatives which would support the enhancing of governance and improving saver outcomes. We look forward to working closely with the Pensions Regulator on this initiative.”
Zedra director Colin Richardson says: “Zedra Governance Limited welcomes the TPR’s planned increased oversight for Professional Trustee Firms. This oversight should concentrate on the standards of professional trustees such as the detail of the APPT professional standards and how trustee firms adhere to the APPT standards.
“Of particular importance is conflicts of interest with the marketing of advisory services from some trustee firms, and how firms operate and comply with Corporate Sole Trustee appointments. TPR could usefully assess the burden overall of regulatory compliance and consider with trustee firms what appropriate proportionality means for different schemes according to their circumstance.”
XPS Group partner Rob Wallace says: “As schemes have faced an ever more complex environment, with key decisions to be made about strategic direction and layers of new regulation, it’s no surprise that the use of professional trustees has increased hugely over the last few years. This trend has been encouraged by the Regulator, so it seems a logical step for them to assess the best way to engage with the professional trustee market. Targeting this engagement at a firm level (rather than an individual level) has to be the right approach for the Regulator’s stretched resources, as it will give them better coverage of this vital part of the pensions system.
“We’d encourage the Regulator not to lose sight of professional trustees outside of the 10 largest firms mentioned. We often see high standards of trusteeship from solo professional trustees or those from smaller firms, and we believe the Regulator could obtain valuable insights with engaging with these trustees too.”
Independent Governance group head of policy and external affairs Louise Davey says: “IGG welcomes The Pension Regulator’s increased focus on the professional trustee market. We believe it is important for TPR to fully understand how the market operates and how professional trustees manage risks and enhance outcomes for millions of pension scheme members. IGG has always championed the highest standards of governance, both for the schemes we oversee and in the way we manage the business. Embracing diversity is central to achieving those standards. We are pleased to have been approached by TPR to work closely with them as they focus on ensuring operational excellence across the professional trustee industry”.
