By Dale Critchley, Workplace Policy Manager, Aviva
Including, decisions within multi-employer pension schemes to consolidate assets within a smaller number of default arrangements. This concentration of assets can improve performance by making new asset classes available, and larger schemes stand to benefit from better governance
The DWP has recently launched a consultation which is looking to take stock of the current trustee landscape and consider how it needs to evolve when it comes to the governance of both defined benefit and defined contribution pension schemes - schemes that currently invest £1.5 trillion, for the benefit of over 40 million members.
Professionalising trusteeship is one route the DWP sees as part of the solution, and something that may happen organically as we see greater consolidation of single employer trusts and smaller master trusts, into larger more professionally run pension schemes. The DWP recognise the benefit of this approach, but also the risks around a concentration of governance within a relatively small number of trustees.
The introduction of graduate training programmes by professional trustee firms is also encouraging, helping to establish trusteeship as a viable early career path, rather than something taken up only later in working life. Professionalisation isn’t the only answer, however. The best trustee boards are those with a mix of skills, knowledge and experience, including hard and soft skills that may take time to develop. The wider experience that lay trustees can bring to a board should not be overlooked, while member representation is one way to ensure that scheme members have a voice.
The pensions industry is going through a significant period of change which trustees are having to navigate. Regulation will introduce new market dynamics, mergers and acquisitions, the incorporation of new asset classes, and the development of new retirement income solutions. Outside of regulation the growth of artificial intelligence may provide opportunities or fresh challenges to trustee boards.
Another very real risk identified by the DWP consultation reflects the age demographic of trustees, with statistics suggesting that 85% of trustees may be planning to retire within the next 3 years. Succession planning, upskilling and recruitment have never been more important.
This potential mass retirement of trustees represents both a challenge and a rare opportunity to ensure that trustee boards reflect the members whose savings they steward.
Ultimately, effective trusteeship depends on diversity of thought. A board that brings together different perspectives, professional backgrounds and lived experiences is better placed to challenge assumptions, spot risks, and make decisions in members’ best interests.
Our industry needs trustee boards that are fit for the future, ready to guide members through change, and capable of delivering for the full breadth of society.
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