Saturday, 27 May 2017

    Trustee training: a rough guide

    Trustees are expected to keep their knowledge and understanding up to date. Here’s how they can do it.

    The rise of stressed schemes to front page news over the past year serves as a stark reminder of just how much responsibility pension fund trustees have.

    classroom learning

    Trustees are there to look after members’ interests, and often the pension schemes they are in charge of are very sizable operations in their own right. In fact some of these pension schemes are larger in terms of asset value than the employers that are sponsoring them.

    So there’s no denying that it’s a big and complicated job.

    The Pensions Act 2004, and the trustee knowledge and understanding requirements included in it, recognised the importance of trustee training, and the Pensions Regulator launched its trustee toolkit in 2006.

    The concept was to provide trustees with a free way to get to grips with the minimum knowledge and understanding requirements

    Kerry Coleman, e-learning manager at the Pensions Regulator explains: “The original concept behind the trustee toolkit was to provide trustees with a free way to get to grips with the minimum knowledge and understanding requirements set out in that legislation.”

    The regulator’s website also offers a good overview of all the different areas of trustee training that are involved. It has tools to help trustees identify areas in which individual trustees are already knowledgeable and, more importantly, where there are the gaps in the knowledge. The service then suggests training modules to fill those gaps. The trustee toolkit modules covers all aspects of trusteeship and is constantly expanding.

    Bitesize training that is quick and easy, and will update trustees on what has changed over the past year

    Coleman says: “Over the next 12 months we’ll be looking at the DB content again, that will need an update in light of some of the guidance that we’ve put out, and we’re also looking at creating ‘keeping you up to date’ modules - bitesize training that is quick and easy, and will update trustees on what has changed over the past year.”

    Thirst for knowledge

    But it doesn’t stop there. Claire Finn, head of UK DC investments at BlackRock explains the need for ongoing training. She says: “There is a big thirst for information and training, particularly when there are developments in regulation where there is a need for trustees to understand the nuances within it, and how they should go about implementing that.”

    It’s important to ensure that trustees of all kinds have sufficient and relevant knowledge and understanding to fulfil their duties, and that this is up to date. Ultimately, fulfilling their duty well will lead to good member outcomes, and that’s the name of the game.

    Trustees are holding the reigns when it comes to all of the different elements of running a pension scheme

    Liz Fallon, partner at Eversheds, points out another serious implication of falling short in trustee training. She says: “The trustees are holding the reigns when it comes to all of the different elements of running a pension scheme whether it’s the administration of paying members benefits through to investment strategy, or dealing with all of the actuarial valuations, or legal issues.

    “It’s as well to be properly trained because it’s a complex role with the potential for personal liability if you’re an individual trustee.”

    On the job training

    To build on the broad education trustees can get from the regulator’s resources, schemes advisers often offer on the job training. Actuaries, legal advisers and investment managers are all willing to devote time in trustee meetings to deliver training on new legislation coming through, or a particular type of investment strategy, says Fallon.

    If you can complete the trustee toolkit, you’ve got a good grounding of the responsibilities of a trustee

    But Peter Sparkes, member nominated trustee for the Thomas Cook DC Pension Scheme and committee member at the Association of Member-Nominated Trustees (AMNT) believes the impetus often lies with the individual. He says: “If you can complete the trustee toolkit, you’ve got a good grounding of the responsibilities of a trustee.

    “But once you’ve finished the trustee toolkit, what next? It’s very much down to you an MNT to keep up to date and develop your own knowledge.”

    In addition to the sources Fallon recommends, he suggests conferences like Engaged Investor’s Workplace Pensions Live, courses run by industry associations, industry media and effective ongoing sources of information and training.

    Different needs

    What you’re trying to achieve from the trustee board overall is different people with a balance of skills and experience all coming to the table and facilitating an informed and well-rounded discussion. Professional trustees are often appointed to work alongside lay trustees the on the board, and are typically chosen to contribute expertise in a certain area, for example to offer a legal or financial perspective.

    You’ve all got the same job to do, but each trustee will come at it from a different area of specialism

    Fallon believes that the eventual level of training expected of lay and professional trustees is the same. She comments: “You’ve all got the same job to do, but each trustee will come at it from a different area of specialism and a different level of expertise, dependent upon who you are.

    “So rather than a distinct difference between the level of training needed for lay and professional trustees, it could just be a harder job for lay trustees to build up the level of knowledge because they may not have been involved in pensions for so long, or they haven’t got the background knowledge that a professional trustee might bring by being a lawyer, or an actuary or an accountant, for example.”

    Sparkes however, is of the impression that more is expected of professional trustees, and believes lay trustees have more of a vocational approach and do it because they want to or they’ve retired.

    The moment you have that professional tag added to your name, more is expected of you

    He says: “From a professional perspective, you go into it because you want a career in the pensions industry so there’s a higher expectation. The moment you have that professional tag added to your name, more is expected of you.”

    Hitting the ground running

    The regulator expects new trustees to get up to speed within the first six months of coming on board, so the training they offer is a good place to start. Trustees can go through their step-by-step plan to produce a personal development initiative placing topics in order of importance and priority, dependent on what’s on the agenda for that scheme.

    Trustee chairs should ensure a spread of competencies when putting together a trustee board

    Tim Middleton, technical consultant at the Pensions Management Institute, explains the planning should start even earlier than that though. He says: “In the first instance, trustee chairs should ensure a spread of competencies when putting together a trustee board, to cover all the specialist skills that are needed.

    “Then on ground level, each trustee should do a training needs analysis to look at their strengths and competencies, and where there may be gaps in that knowledge. A combination of the trustee toolkit, seminars, reading, external courses and working with their advisers can then help to fill those gaps.”

    If you’re putting together a training programme for the entire trustee board, understanding where the gaps in people’s knowledge are is crucial. Tools such as a skills matrix are useful to log this, and can be used to monitor and fill those knowledge gaps throughout the year.

    Holding accurate training logs for each trustee is also a useful idea, although a log is only as good as the information contained within it so there needs to be a cyclical review of the logs against training progress, and trustees should individually be responsible for keeping their log up to date.

    As Sparkes eloquently puts it, “the overall objective is to end up with good trustees that are member focused,” and continued trustee training is the foundation of that.

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