The 21st Century Trustee – collaboration (and jubilation?)

The initial noises coming from those moulding the future of trusteeship appear encouraging.  This is what we have gleaned following a recent announcement from representative bodies within the pensions industry.

The Professional Trustee Standards Working Group of the Association of Professional Pension Trustees (APPT) (…and breathe), has been set up as a direct response to a recommendation made by The Pensions Regulator (TPR).  In asking the industry to roll out to a recognised and universal set of standards to which those who offer professional trustee services should conform, TPR has set its initial challenge.

The Working Group will be tasked with agreeing and rolling out these yardsticks, formally known as Fit and Proper Protocols.  These will cover experience, competencies and professionalism aimed at various levels of professional trustee roles such as Chairs or Sole Trusteeships.

The catalyst for this announcement – the Regulator’s report on its professional trustee survey, whom they “expect to meet a higher standard of care than their lay counterparts”.  This is the latest publication by TPR in its series on ‘21st Century Trusteeship & Governance’ – TPR’s ongoing campaign to ensure action is taken to improve trustee competence in the governance and administration of pension schemes.

"Only 50% conducted directorship checks on such persons and a measly 43% conducted employment history checks."

Whilst the relatively small sample size (62 organisations offering professional trustee services, less than 20% of those asked to contribute, responded) means the report should be greeted with prudence, its findings did offer some eyebrow-raising trends.  

No, not that 93% of organisations who offer professional trustee services conduct skills tests on such individuals – it is good albeit expected.  More concerning is the inconsistency in approach when assessing what the industry considers a “fit and proper” individual: 71% conducted credit checks and 58% criminal checks.  Only 50% conducted directorship checks on such persons and a measly 43% conducted employment history checks.  The variance in terms of hours spent by such trustees on each trustee position is also something potential suitors should consider when assessing an organisation or individual’s suitability. Four organisations reported that they spent less than three hours a month, while three organisations said they spent between 70 and 140 hours a month.

The APPT announcement is something which all industry stakeholders should welcome.  The approach adopted in response to TPR’s recent survey findings and recommendations appears to be appropriate and proactive.  The premise for professional trustees to lead by example in ensuring homogenous standards has to be applauded; however, this should not be to the detriment of those professional trustees who set benchmarks beyond the protocols that are due to come into effect.  Therefore, it should not have been seen as a drive towards the lowest common denominator; quite the contrary.  The challenge for the Working Group is to ensure that the qualitative elements of the protocols are in no way compromised.  

TPR has agreed with suppliers in not imposing over-bearing requirements to those offering such services.  To this extent, the market remains unregulated and this presents challenges to stakeholders seeking to add the expertise of professional trustees to their trustee boards.  The issue has been clouded somewhat by TPR’s definition of a professional trustee within its recent consultation document – where the individual or organisation consider themselves the expert “generally” and the carve-out of independence as a determinant.

Trustee boards seeking such services require the confidence that they are selecting an organisation which will provide them with expert input that will far exceed what is available within its lay trustee composition.  The protocols should impose a level of standard-setting that market forces alone would not have generated.  The policing of these standards (where quality should not be compromised) is one of the important drivers for the Working Group to monitor within the agreed protocols.  The measure of its success will be how it has driven up trusteeship standards (particularly in governance) and, consequently, how it has improved member outcomes.