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For a long time, the UK has set the gold standard in trusteeship. Through decades of change and market volatility it’s served the market well. A robust fiduciary network with member interests at heart is behind this success. But it’s also a system that wasn’t fundamentally reviewed for over 20 years. During that time, the pensions landscape transformed. Schemes have consolidated and Master Trusts are growing. Trustees are also increasingly having to navigate more complex strategies, including significant innovation in retirement solutions and the growing use of private market investments in DC schemes.
For these reasons, I think the Government’s current review of standards in trusteeship is both timely and welcome. What it highlights is the need to modernise and build upon the core principles that have worked so well in a way that can improve member outcomes.
A strong starting point
Among these core principles are trustees’ legal duties, which provide powerful anchors for independence, accountability and positive outcomes. Another positive is the increasing number of professional trustees, particularly in the context of bigger and more complex schemes, which has benefited both decision-making and the quality of governance. Many Master Trusts’ trustee boards already operate to standards that compare with those of the corporate world, such as carrying out structured reviews, having clear processes for conflict management and robust oversight of advisers and service providers. They’ve helped their schemes to grow, while keeping a focus on member outcomes. Because the system has served well up until now, any reforms can build upon it rather than redraw it from scratch.
The importance of good judgement
When it comes to change in this sphere, though, one of the biggest risks is mixing up trustee capability with technical compliance. Trustees don’t need to be regulatory technicians. What really matters is their judgement. How good are they at overseeing risk, challenging advisers, steering through uncertainty and making decisions that are in members’ long-term interests? To assess this, I believe that mandatory and relevant CPD should be a core part of modern trusteeship. It will need to be closely linked to emerging risks and best practice, rather than just a box-ticking exercise. If it’s done well, training can lead to better challenge, stronger oversight and more confident decision-making at the board level. It can also help to build a shared professional culture that sets out clear expectations on trustees’ behaviour, ethics and accountability.
How can we widen the trustee pool?
If we want to raise trustee standards, we also need to think about who becomes a trustee in the first place. Quite often, trustees are drawn from a narrow pool, which not only influences diversity, but resilience, too. Having a mix of perspectives, experiences and ways of thinking can really benefit a board, especially if it’s one that’s running a large or complex scheme that serves a diverse range of members.
Programmes like the Trustee Accelerator Programme take candidates from a wide range of professional backgrounds, some of whom won’t have considered trusteeship as a career option, and make them ready to become trustees. They show what’s possible when training, mentoring and real-world board exposure come together. In future, these programmes are likely to play a key role in building a more diverse population of trustees.
We also need to consider the length of time that trustees serve. Part of good governance is renewal, which is why having trustee tenure limits that align with best practice is important. Set at about nine or ten years, these would help stop trustees becoming entrenched, as well as supporting board refreshment and helping to make sure that their perspectives keep evolving.
Listening to members
Being effective as a trustee means being able to listen to members, but the way in which we capture their voices needs to start to reflect how schemes have changed.
Traditional models, where members nominate trustees, can work very well in single employer trusts. But in large-scale, consolidated schemes that serve hundreds of employers, this approach can be impractical and might even narrow representation.
Governing in a modern way needs modern methods of listening. Useful tools to help with this might include:
- engaged member communities
- behavioural analysis
- in-depth research
If we use them well, they can provide deep insights into member thinking.
Acknowledging administration
Any conversation about trusteeship shouldn’t overlook one of the things at its core – administration. High-quality administration can help cement member trust, engagement and outcomes. With the advent of initiatives like dashboards, Guided Retirement and Value for Money assessments, trustees’ responsibilities on this front will only become more important.
In practice, this means governance reform needs to send clear signals. If administration is underplayed, it might weaken the foundations that the reforms are meant to strengthen.
Taking a measured approach
In short, trustee reform doesn’t need to be radical to be effective. Designed carefully, it can raise standards, increase professionalism and improve outcomes, at the same time as preserving the heart of system that already works well. The opportunity that’s available now is to evolve trusteeship for the next generation of savers, without losing sight of what made the UK model the gold standard in the first place.
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Phoenix Life Limited, trading as Standard Life, is the provider of the Standard Life DC Master Trust. Phoenix Life Limited is registered in England and Wales (1016269) at 10 Brindleyplace, Birmingham, B1 2JB. Phoenix Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Standard Life Master Trust Co. Ltd is trustee and scheme administrator of the Standard Life DC Master Trust. Standard Life Master Trust Co. Ltd is registered in England and Wales (09497864) at 10 Brindleyplace, Birmingham, B1 2JB.
