Despite mounting issues and pressures on UK company pension schemes, many are putting cost before quality in staffing the trustee board of their schemes, reveals research by Capita Fiduciary Group, providers of independent trustee services.
The study of 219 finance directors reveals that independent professional trustees are only employed to the pension trustee board in 38% of schemes. Cost is viewed as the biggest obstacle to appointing a professional trustee to the pension trustee board, with 39% citing this as their reason for not making an appointment.
However, those who do employ a professional trustee see clear benefits. The key drivers behind these appointments are the quality of the advice available, with finance directors citing specific reasons such as having a wider knowledge of the issues facing the trustee board (59%), influencing better quality decision making by the pension trustee board (47%) and assisting the trustee board to work more effectively (35%) (See Table 1).
Table 1: How finance directors believe professional trustees add value to their pension board:
|
Wider knowledge of the issues facing the trustee board |
59% |
|
Better quality decisions made by the pension trustee board |
47% |
|
Make the trustee board work more effectively |
35% |
|
Improved conversations with pension trustee advisers |
29% |
|
Free up time for company employees who are also trustees |
27% |
|
Resolution of conflicts of interests |
18% |
|
Better negotiations with the company |
15% |
Michael Clark, Head of Pension Trusts, Capita Trust Company Limited commented “A professional trustee is a key player in the resolution of pension issues which are increasingly key issues for the entire company. The value that professional trustees can offer far outweighs the outlay as evidenced by the views of those finance directors whose companies employ them. Indeed, a professional trustee is a way to reduce both costs and the risk to the company sponsor of the pension scheme.”
CASE STUDY
The worth of professional trustees was recently highlighted at a company where the scheme trustees were growing increasingly concerned that their pension administrator was not providing the quality of service expected of them. A serious systemic error affecting deferred members was the final straw. The trustee board, which consisted of employee nominated and member nominated trustees plus Capita as professional trustee, recognised the need for an in-depth review of the administration services.’ However, work commitments meant the employer and member nominated trustees could not progress the review as quickly as required given the seriousness of the administration issues. The professional trustee was tasked with leading the review, including issuing a detailed tender document, reviewing all submissions, making on-site visits to three short-listed providers, and presenting the findings and a recommendation to the trustee board. The resultant change of provider was approved by the trustees as a board, with the professional trustee project-managing the appointment and transfer to the new provider.
The trustees made the final decision as a board but were able to delegate the project specifics to the professional trustee who, through their wide pension knowledge and experience, could ensure that all requirements were fully met in a timely and efficient manner. From the perspective of the scheme the transfer of the appointment resulted in improved service and increased cost effectiveness.
The sponsoring company’s view was that the involvement of the professional trustee in the process more than met expectations with regard to professionalism and financial savings.
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