PwC surveyed trustees of 54 schemes ranging in asset size from under £0.5bn to over £5bn and found the annual pay for the board chair, and chair committee, had reduced. Board member only trustees have seen pay increase, particularly at the higher end of the scale.
Peter Sparshott, pensions partner at PwC, said: “Although average annual pay for chairs has reduced over the last two years, in 2016 we saw a closing of the gap in annual salary for trustee chairs and board members. This could be attributed to the larger overall size of trustee boards for schemes sized over £1.5bn and the increasing demands on board-only member time as more schemes close to new hires and future accrual or undertake other liability management exercises.”
The average number of working days required of board members continues to rise with nearly two-fifths (37%) working between 11 and 30 days per annum. For trustee chairs the average time commitment has plateaued after rising consistently since the survey started in 2007. However, the number of trustee chairs working more than 40 days per annum is at its highest level to date, up to 28% from 24%.
“With the introduction of additional governance requirements and the chair’s statement since the last survey, trustee chairs have had more work to complete on top of their normal responsibilities. However, this could be offset by the number of defined benefit schemes included in the survey and the distribution of responsibilities across the board.”
Board composition
The number of respondents on boards with 9-11 members has seen a reduction by nearly a quarter, down to 33% from 55% in 2014. More boards now have between six and nine members, particularly for schemes under £1.5bn. However, there has also been a significant change in board size for schemes with asset sizes between £1.5bn-£5bn who favour 12 to 14 members.
The proportion of boards with no independent trustees has increased to 33% in 2016, up from 18% two years ago while the number of independent trustees on each board remains relatively low with 41% employing only one.
Fiduciary management
For the first time this year, respondents were asked to provide data on the use of fiduciary management. Despite the overall increase in assets under management in the UK, the majority of respondents do not currently use fiduciary management. For those that do, investment expertise and the ability to be nimble in the current market environment were the top two reasons for its use.
Andrew Drake, partner, commented: “Fiduciary management can be very effective but it’s not for everyone. In addition, the market for these services is changing rapidly, so it’s important that every scheme using fiduciary management independently assesses its ongoing suitability and the fees being paid. This is particularly the case in light of the recent FCA Asset Management Market Study, which highlighted potential conflicts of interest and value for money."
Peter Sparshott, concluded: “The results of the survey show that long-term planning and understanding the risk exposure are the main focus for trustee boards over the coming year. These areas will have the greatest impact on whether the scheme will meet its funding objectives.”
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