The decisions trustees make can have a major impact on scheme members and employers. It is therefore essential that they have the appropriate knowledge and understanding to be able to do their job properly.
As this is so important it has been enshrined into law. The Pensions Act 2004 requires that trustees have knowledge and understanding of the law relating to pensions and trusts and the principles relating to the funding of occupational schemes and the investment of scheme assets. Trustees are also required to be conversant with their own scheme's trust deed and rules, statement of investment principles and statement of funding principles (where relevant), as well as any other policy document. This requirement is often referred to as the trustee knowledge and understanding requirements, or sometimes just as “TKU”.
The Pensions Regulator’s view is that trustees should review their knowledge and understanding against the “scope guidance” at least annually. This should enable them to determine their strengths and weaknesses, and any gaps. The gaps can then be addressed with a training plan.
It is sensible to schedule relevant training shortly before specific projects are to be undertaken. For example, it is helpful to have valuation training just before undertaking a triennial valuation and to have training on investment matters shortly before an investment review.
Training can take many different forms – for example reading, attending adviser conferences (many of which are free), completing the Regulator’s free online learning programme (the Trustee toolkit), attending trustee training courses run by a professional provider, and the whole board receiving bespoke training at trustee meetings. Trustee training may form part of regular trustee meetings or specific training days could be scheduled to cover “big ticket” topics.
The Regulator’s view is that all trustees should complete the relevant parts of the Trustee toolkit unless they arrange equivalent learning.
New trustees have a lot to get to grips with and will generally benefit from receiving induction training. Under the TKU legislation they have six months to get up to speed, although it is important to note that they are still responsible for any decisions made during that period. They should discuss appropriate training with their chair, but induction training and the Trustee toolkit are good places to start.
Pension scheme matters are very complex and trustees should feel comfortable asking questions if they do not understand something, and asking for training where required. Any training needs should be discussed at meetings and/or flagged to the chair, or pensions manager or scheme secretary if there is one for your scheme.
Trustees should keep a record of the training they have undertaken to assist in demonstrating that they have complied with the TKU requirements.
The Regulator feels that chairs should consider conducting individual performance appraisals with trustees and an annual evaluation of the board’s skills, knowledge and effectiveness (see the section on trustee effectiveness). The aim of doing so would be to identify any gaps that need to be filled to meet the objectives set out in the scheme’s business plan.