What trustees should remember not to forget…

Estimated reading time: 7 minutes

Practically every agenda for board meetings would include the following items in some shape or form:

  • Apologies for absence
  • Conflicts of interest
  • Agreement of last time’s minutes
  • A review of progress with actions
  • Risks to the scheme
  • Investment matters
  • Actuarial matters
  • The strength of the employer’s covenant
  • Administration 
  • Date of next meeting

There are, however, other perhaps less obvious matters that really should be on more agendas.  We’ll take a look at a few which might be worth including if you don’t already do so. Four of these are included in The Pensions Regulator’s list of “topics that should be covered at most board meetings”, detailed in its 21st Century Trusteeship campaign.  We’re not convinced this is happening.  

A further item about the management of projects is really obvious when you think about it. The trouble is you might not think about it, and you could easily come a cropper if you don’t.  

This item definitely deserves more attention than it gets. If members are not sufficiently engaged with pension scheme matters they might not be saving enough for their retirement.  And they may not be appreciating the benefits the employer is providing.  So this is definitely a topic that should not be forgotten about.

Hopefully, this is something that your scheme is considering but, if not, here are some more unusual ideas for ways to help boost engagement:

  • video or telephone conference town hall meetings
  • periodic face-to-face meetings
  • focus groups or forums to ask for members’ views
  • for larger schemes, a member panel
  • a member website or portal or other inventive use of IT

Most of these come with an associated cost, some of which are significant. However, the additional communication effort can support members having better retirement outcomes - hopefully the aim of all trustees and employers supporting and sponsoring pension schemes.

Some members may have particular communication needs – for example those with sight impairments. You might want to check with you administrators how they support members with special needs. 

Although not always related to member engagement, some communications come with associated legal disclosure requirements. Your administrators should have service standards that comply with these requirements. Additionally they should report against these standards so that you can see whether they are met. 

The Pensions Regulator’s view is that setting a clear purpose and strategy is essential to managing schemes effectively and getting good outcomes for members. It believes that trustees should develop a business plan to help them plan ahead and comply with any legal requirements.

The Regulator believes that the business plan should contain strategic goals and that progress should be checked against short and medium term objectives. It should then help to act as an early warning system for any problems.  

A business plan is useful for other reasons too. For example, it should help the trustees to:

  • better understand the items of work arising in the future, the time available, and the amount of delegation therefore required for more routine matters
  • decide the order of priorities and allocation of resource
  • plan training
  • co-ordinate advisers
  • engage with the employer more efficiently

As Lewis Carroll noted “If you don’t know where you are going, any road will get you there”.  If you have a business plan you will have more of an idea of where you are going and have a better chance of being able to work out the best route. So don’t forget to put this on agendas.

From time to time big and/or complex projects will arise and will need to be completed. It is likely that advisers will be involved and there is potential for costs to escalate unexpectedly. It is important to ensure that any projects are well managed. Project planning and project governance are essential.

Examples of projects in which trustees could become involved include:

-    An audit of benefits/data cleansing project
-    GMP reconciliation/rectification/equalisation/conversion
-    Liability management such as enhanced transfer value exercises or buy-in or buyouts
-    A change in administrators

When faced with a big project the following steps are essential:

  • Identifying the aim and how that supports the longer term strategy of the scheme
  • Scoping the project
  • Agreeing the governance structure and who has the power to make decisions e.g. setting up a formal sub-committee of the trustees with stated terms of reference
  • Determining the required resources and from where these should be sourced
  • Identifying all stakeholders
  • Considering potential risks and how to mitigate them
  • Agreeing responsibilities, budgets, reporting and timelines, including any milestones 
  • Producing a project plan
  • Agreeing how to deal with any obstacles that may arise and how to escalate issues should this become necessary
  • Agreeing criteria by which the success of the project can be measured  
  • Recording decisions taken along the path of the project
  • Monitoring progress against targets in the plan.  This includes both results and budgets.
  • A closure report setting out what has been done e.g. a record of data work can help when going to buyout providers

It is also good practice to have a “wrap up” discussion after each project to discuss any lessons learned for next time and implement any changes arising as a result.

As mentioned above, this is pretty obvious when you think about it. But it’s all too easy to launch in with enthusiasm when a new project starts, only to end up encountering problems because things haven’t been planned properly. Another thing to remember not to forget.

Professional fees and expenses are generally paid either by the trustees out of scheme funds, or by the employer. They can be significant. It is important to set up and follow budget monitoring procedures so that everyone’s responsibilities and authorities in this area are clear. This should result in invoices only being settled when appropriate, and on time, meaning that there will be no interest added for late payment. 

Many sponsoring employers ask for input from their trustees and advisers to produce an estimated annual budget, broken down into estimated monthly fees and expenses. Once the budget is agreed it can be used as a check against any monthly invoices. Experience will not be in line with the budget (unless a fixed fee is payable) but it will be a good starting point when reviewing invoices.  

This approach is sometimes used in conjunction with a purchase order system. Whoever has authority to make financial decisions authorises a fees and expenses spend of £x for a given period - the purchase order.  When invoices are settled the amount is deducted from the remaining balance of the purchase order (after the deduction of authorised fees and expenses paid to date).  A scheme may use the purchase order system for routine fixed costs but not for amounts that can vary.

It is sensible to monitor the progress of the purchase order during the period to which it relates to act as an early warning system. For example, half way through the period you might expect only half of the purchase order to have been “spent”. If this is not the case it may indicate a problem.

Information from the budget may feed into cashflow monitoring for the scheme to ensure that there is enough cash in the scheme to pay benefits when they fall due.

Invoices submitted by advisers need to be carefully checked and any queries raised with them. If insufficient information is provided with invoices, then more detail should be requested.  

Special arrangements may need to be in place to authorise professional trustee fees as it would not be appropriate for the professional trustee to sign off their own fees.

It is unlikely to be possible to completely control adviser fees – apart from anything else they cannot control legislation or mistakes made by previous advisers that come to light - but that doesn’t mean you shouldn’t try.  Definitely something not to forget.

Decisions made since the last meeting

Written records of trustees’ meetings must include “whether since the previous meeting there has been any occasion when a decision has been made by the trustees and if so the time, place and date of such a decision, and the names of the trustees who participated in the decision”. It’s not especially exciting but if you don’t do it you’ll have a problem to deal with.  So please remember not to forget to include decisions made since the previous meeting on agendas.

If you're interested in this, you might also be interested in...

What TPR expects of 21st Century trustees

TPR carried out research which identified that many schemes were not being run to the standard expected by TPR.  On the back of these findings TPR initiated an education program which was given the name of “21st Century Trusteeship”. Read Christine Kerr's briefing note for more. 

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