The Pensions Regulator’s consultation on the future of trusteeship and governance closed last month. It remains to be seen what changes will be introduced but one area of consideration is whether pension schemes may be required to have an accredited professional trustee on their trustee board. It seems reasonably clear that the Regulator believes that the vast majority of pension schemes would benefit from this, and that a continued reduction in the number of schemes (partly through consolidation) over the next five years might make this more feasible than it would be now. The Regulator’s definition of a professional trustee, is well known, being broadly someone who acts as trustee of a pension scheme in the course of the business of being a trustee, including representing or promoting themselves to one or more unrelated schemes as having expertise in trustee matters generally, whether for remuneration or not.
What raised expectations will bear down on such trustees in the coming year? Whilst the Regulator welcomes accreditation, it sees this as being distinct from the TKU standards that it enforces. So, holding professional trustees to higher standards than lay trustees could in the future involve both setting higher trustee expectations in terms of TKU enforcement and also requiring professional trustees to be accredited. More immediately, though, the Regulator has welcomed the Professional Trustee Standards (PTSs) published by the industry PTS Working Group in February this year and the development of the accreditation framework by the Association of Professional Pension Trustees.
The finalisation of the framework has been delayed but hopefully it will be in place by the end of the year, such that professional trustees seeking accreditation will need to ensure they satisfy the requirements in the course of next year (on the assumption that a transitional period of grace). These requirements will most likely comprise: complying with a 'fit and proper' test, similar to the master trust trustee test and presumably covering professional status, business interests, solvency, past regulatory investigations etc.; two references from reputable figures in the industry; passing the PMI Level 3 Award in Pension Trusteeship; and completion of a 'soft skills' test designed to assess skills and behaviours associated with trusteeship.
After the initial accreditation, the professional trustee will need to attest annually that they remain 'fit and proper' and continue to adhere to the PTSs; they are up to date with the Regulator’s Trustee Toolkit; and they have completed at least 25 hours CPD.
There will inevitably be costs involved for professional trustees in the initial and continuing accreditation process but these will almost certainly be seen by the great majority as essential expenditure to maintain their reputation in the industry. One can reasonably expect such costs over time to be passed on to the relevant pension schemes.
The members or savers in the new parlance, at least in DC arrangements, and the sponsors will likely expect in return to see improved governance and administration resulting from accredited professional trusteeship. It is clear from the trusteeship and governance consultation exercise that the Regulator likewise would expect nothing less