Made to measure
Just as each trustee is different, trustee training must be unique to their own needs and the specific needs of the scheme, says Andrew Sheen
Times have never been harder for trustees.
The aftermath of the financial crisis has exposed severe weaknesses in scheme funding, putting trustees under ever greater pressure to make good shortfalls and deliver returns.
The asset management industry, a home to financial innovation, is never far from developing and promoting new and ever more complex ways to invest.
Then there is the seemingly never-ending merry-go-round of rules and regulation, legal interpretations and red tape. Keeping up with all of these developments and staying abreast of training needs – let alone running a scheme – can be a full time job.
“What’s expected of trustees has changed dramatically in the past 20 years,” says Gary Crockford, manager of the knowledge and research centre at Buck Consultants.
The Pensions Act 2004, which put in place the Pensions Regulator and Pension Protection Fund, also introduced the formal requirement for ‘trustee knowledge and understanding’, or TKU. But TKU requirements are not a ‘tick box’ exercise: trustees must complete the syllabus within six months of first becoming a trustee and should undertake regular training to ensure that they remain up to date with developments in pensions.
“Six months is not long enough,” says Bryan McDaniel, a senior consultant at JLT Benefit Solutions. “Six years or even longer isn’t long enough. Some people can pick things up very quickly, but six months is nowhere near long enough.”
Trustee training and continual development is therefore one of the most crucial aspects of trusteeship, but one that many in the industry fear is not being given enough attention.
Tim Middleton, technical consultant for the Pensions Management Institute says he is concerned that “there are trustees even now who don’t take TKU seriously”.
As well as being in breach of their duties, he says a lack of knowledge and understanding means “trustee boards that don’t develop their skills won’t be able to challenge their providers” and get the best for their members.
There is a range of training and training providers – from seminars and bespoke sessions, to training before or after trustee meetings, the National Association of Pension Funds conference, the PMI’s own Trustee Group seminars, informal trustee networks and, of course pension publications like Engaged Investor. But Middleton says “some are more useful than others.”
The PMI runs its own award in pension trusteeship for trustees looking to gain a professionally recognised qualification, which is based on the Regulator’s TKU requirements.
“It gives trustees the opportunity to demonstrate their skills in trusteeship,” Middleton says.
JLT’s McDaniel agrees with these concerns, adding that while he “wouldn’t want to tar all trustees in the same way”, the variation in levels of knowledge and understanding mean that “it’s getting to the point where proper certification wouldn’t go amiss”.
But in the meantime, trustees need help navigating the plethora of training providers and courses. To help chart a course, Engaged Investor presents a four stage guide to better training.
1. BRUSH UP ON THE TOOLKIT
The first port of call for any trustee training should be the Regulator’s online Trustee Toolkit, which is being refreshed (see box).
The Toolkit is an online training resource containing 11 modules that cover the entirety of the TKU syllabus. It has a specific remit: it is designed solely to help deliver TKU, as per the Pensions Act 2004.
However, the Regulator has been dogged by accusations that while many trustees sign up to the Toolkit, few trustees have actually completed it.
According to the Regulator’s own figures, released under Freedom of Information laws, as of September 2011, over 41,200 individuals had signed up to the Toolkit, although only just over 7,300 had completed all 11 modules – a rate of 18%.
Of this relatively low figure, Susannah Hines, customer propositions manager at the Regulator says: “While we’d like every trustee to go through and complete the Toolkit, it’s not the only means of providing training.” Gary Crockford, manager of the knowledge and research centre at Buck Consultants, says that the Toolkit is a “good place to start”, even for experienced and longstanding trustees, as it would serve as a refresher.
Trustees can sign up for the Regulator’s news by email service
2. GO ON A COURSE
Following on from the Toolkit, training days are a common and popular way to provide trustees with the knowledge and expertise they need to fulfil their duties.
Most pension law firms, consultants and asset managers hold their own training events, and there are regular training forum days organised by Engaged Investor. Many of these are free to attend for clients of the firms, although some are paid for.
Lynch says that for trustees starting out in their duties, training days that serve as a general introduction to pensions and trusteeship can and do make sense, but adds that the nature of many of these events – especially concerning paid-for days – can limit their usefulness. “Often these things aren’t best done in a generic sense. Is a full day to spend away from the workplace a worthwhile way to spend money?” she asks.
On day-long courses for new trustees, Crockford says that any training provider must make it clear that “you can’t teach everything in one day”. At best, introductory training can barely scratch the surface of what is required.
Nonetheless, Middleton says such introductory training days play an important role in providing a ground level of knowledge on which further training can build. “It’s generally prudent to assume that when trustees are first appointed, they will have serious gaps in their knowledge.”
He adds that training at this level would focus on the “nuts and bolts” of pensions and trusteeship – looking at pensions and trust law, the basics of investment and the overview of how a scheme works – while more advanced trustees would benefit more from training that allows them to draw on their acquired knowledge and experience.
Discretionary exercises, such as the application of scheme rules in complex benefit cases, or working with consultants to look at de-risking and investments are a good way to put what they have learned into practice. “It’s about the application of knowledge, rather than learning skills,” Middleton says.
3. FIND BESPOKE SOLUTIONS
But all trustees, from the most inexperienced to seasoned members of the trustee board, need to undertake regular training. Indeed, training is every bit as important for older, more experienced trustees – blasé about their knowledge and skills – who may not realise that they have forgotten certain aspects, or that their knowledge has been superseded by changes to regulations.
“There’s a familiarity aspect with experienced trustees,” says McDaniel. “There are some things they take for granted.”
Although the world of pensions is often accused of moving slowly, the constant churn of regulations and investment ideas means trustees can ill afford to stand still in their training, without risking becoming out of date.
Training can take place around trustee meetings, looking at specific agenda items and making sure all trustees are up to date on the latest developments.
For example, if the scheme has a valuation coming up, or is looking at changes to its investment strategy, then having the scheme’s advisors visit the board at a meeting and run through what they need to know as they need to know it, can be a good way of ensuring the board is up to speed.
“The most effective time to do training is just before you put it into practice,” Sackers partner Zoe Lynch says.
Tailoring training to the needs of individual trustees or the requirements of the scheme can be a very effective way of ensuring that any spend on training is targeted and provides value for money. “My personal preference is for specific training for specific trustees. That doesn’t have to be expensive. As soon as you hear ‘bespoke’, you wonder what the cost will be. But bespoke training can be ten minutes or half an hour. If the scheme has a new Trust Deed and Rules, we can talk them through that,” Lynch adds.
In addition each scheme’s documents will be unique, meaning that while general training can equip trustees with the broad skills necessary to run their scheme, bespoke training can be very effective, especially in relation to scheme documents. As there are no standardised scheme Trust Deed and Rules, which are often subject to amendments over the years to reflect changes in the law, and other alterations, having a professional take the trustees through the documents can be invaluable.
“There’s nothing like having your own and being taken through them. Only bespoke training can bring out the differences of your specific scheme,” says Crockford. Boards should also look to maximise the value they get from training by targeting training activities at areas most needed by trustees.
While the Regulator requires that all trustees are conversant with all aspects of running their scheme, it is inevitable that trustees with special responsibilities such as sitting sit on subcommittees should have more in-depth knowledge in certain areas.
“Trustees have a duty to be up to speed,” says Crockford. “They should be asked where they think their gaps are. For example, trustees on the investment subcommittee should have greater knowledge of investments than those not on it.”
Boards should also maintain a training record and carry out regular training audits to identify gaps. This can be carried out by the scheme secretary, pension manager or the chair of trustees, but it is important that the document is used actively, rather than gathering dust.
When gaps in a trustee’s knowledge are identified, there should be steps to put training of some sort in place to address this. McDaniel says that the scheme should undertake regular self assessment of training needs by trustees. “Trustees should do regular self assessment to identify their strengths and weaknesses. Then the scheme can work out what to do to plug these deficiencies.”
4. CHECK OUT ONLINE RESOURCES
Recently, online training has grown in popularity.
Outside of the Regulator’s Toolkit, webinars – internet video lectures, often with presentations and a Q+A session – are becoming more widespread. They can be viewed from a trustee’s desk, removing the need to take them out of the office for the day.
But staying at the desk one uses for the day job brings a range of distractions, like the incessant pinging of emails arriving and phone calls.
Sachers’ Lynch says that people “often zone out” in webinars and other online-based training. “By necessity, they’re generalist and it’s difficult to engage with the speakers. There’s never quite that sense of dialogue.”
Middleton predicts that online training will grow in popularity but will not replace face-to-face training. “It’s really a question of what’s appropriate for needs,” he says, adding that there will be an interaction between online sources, ‘classroom’ based learning and hand-on role play exercises.
Yet no matter what form trustee training may take, trustees must realise that staying up to speed with developments in the pensions industry and their scheme requires a continual effort. Training logs and sending people on courses can only go so far.
Above all, trustees must want to stay up to date with their knowledge. As hard as it may be to keep up to date with very development in pensions – Crockford says it is “practically impossible”, even for full-time pensions professionals – trustees should nonetheless try to keep themselves current by reading the pensions press. They should also bookmark relevant websites, such as the Regulator, on their computers and visit them regularly.
Staying abreast of the latest developments is worthwhile if for no other reason than being able to challenge a scheme’s consultants and ensure that the scheme in run in the interests of its members.
Middleton says: “It’s important that all trustees make sufficient effort to keep their knowledge up to date. Training has to be taken seriously. If they don’t have the required skills, then all sorts of problems can arise; the scheme can effectively be controlled by its advisors.”
REBUILDING THE TOOLKIT
The Pensions Regulator launched the Trustee Toolkit, an online training portal covering the full Trustee Knowledge and Understanding (TKU) syllabus, in 2006.
Now the Regulator is looking to launch its revised and refreshed version Toolkit.
Susannah Hines, trustee propositions manager at the Pensions Regulator, says that in the six years of its existence so far, the Toolkit has been “incredibly well received” with a high number of trustees signing up to complete the course, but “time and technology have moved on” giving the Regulator the opportunity to see where improvements could be made.
But six years is a long time on the web: in 2006, internet giant Facebook was known only by students, Apple’s iPhone had not yet been unleashed on the world and Twitter barely existed.
Clearly, there are advantages that modern website design and technology could bring to an educational tool that Hines admits is “showing its age”.
The Regulator worked closely with the Association of Member Nominated Trustees when testing the new Toolkit. “We could go through it ourselves, but trustees are obviously best. They’re instrumental to get the Toolkit as good as it can be.”
Building on this feedback, the Regulator has improved and enhanced the Toolkit, incorporating case studies and tutorials, as well as adding the ability to work through aspects of the Toolkit offline – that is, without an internet connection.
“Online is great and useful,” says Hines. “But people don’t always have access to the web and want to learn offline.”
Offline access to the toolkit means trustees will be able to take reference material and notes with them to meetings.
Over time, all case studies and tutorials will be available to download, while videos are “definitely a possibility” for the future. “Technology moves at such a pace. We want to make sure the Toolkit is fit for purpose.”