Articles - The regulatory future for sole trustees

 

The code has been expanded in some areas of due diligence on appointment. These are an understanding of the relevant legislation and governance documents around a change of trustee, transfer of knowledge to the sole trustee, and enquiries into the scheme management in place. The code also reflects requirements when moving from one sole trustee to another. 

 

Commercial conflicts and sponsor independence are aspects of the sole trustee model most often scrutinised. It’s therefore unsurprising to see the introduction of proper conduct and advice requirements when negotiating with employers, and for processes to be updated so decisions aren’t unduly influenced by outside interests. 

 

Recognising the APPT’s and TPR’s work on equity, diversity and inclusion, the code expects these areas to be embedded into policies. Firms are expected to consider how diverse views and challenge can be introduced into decision-making.

 

The new code lands ahead of the expected consultation from the Department for Work and Pensions (DWP) on trusteeship more broadly, and in the midst of TPR’s engagement programme with the largest professional trustee firms. 

 

The DWP consultation is expected to probe whether trustee standards and TPR’s trustee oversight are good enough. The Pensions Minister recently said that data suggests 85% of trustees are expected to retire in the next three years, creating a push to explore the current trustee landscape with a focus on regulation and conflicts. 

 

It comes as no surprise that driving up trusteeship standards is at the heart of TPR’s latest corporate plans. Closer engagement with the professional trustee industry and more widely promoting the general code are just part of TPR’s broader scope for ensuring schemes are well run. TPR’s priority is to raise standards of trusteeship through a new strategy, which will set the baseline of new ‘governance quality’ measures reflecting elements of the general code. It'll also work to bring trusteeship into line with other professions and corporate governance standards.

 

Our 2025 sole trustee landscape report looked at TPR’s engagement programme with professional trustees. Nine months on from TPR publishing its insights, we highlight four themes from our discussions with professional trustees: 

 

 

TPR is engaging the largest professional trustee firms, which typically have tens of trustee directors; we estimate they cover 80–85% of professional trustee appointments. The market would like any outcomes to apply to and be suitable for all professional trustees. It’s unclear how TPR will take into consideration the possible contrasting operations and governance structures of small firms. 

 

Professional trustees can play various roles: chair of the trustees, co-trustee or sole trustee. In co-trusteeship the trustee acts as part of a board but is not the chair. In sole trusteeship a professional trustee firm alone performs the role of a corporate trustee to a pension scheme. 

 

Understanding how a firm’s policies and operations vary between these roles is an important part of TPR’s engagement programme. It must evaluate the risks and benefits of each model so it can put proportionate guardrails in place where needed. This'll give decision-makers confidence that their chosen approach meets their governance needs. Some professional trustees see TPR’s engagement as an opportunity for TPR to dispel myths around the sole trustee approach and improve the narrative around how professional trustees can be part of the solution for some trustee boards. 

 

By gaining a deep understanding of the market, TPR would give professional trustees confidence that it’s not overly relying on rules of thumb from other corporate governance standards. Most firms stressed the importance of considering the nuances of pensions trusteeship and the variety of roles that some trustees have inside and outside their firms. A cross-section of the market hoped that TPR’s better understanding will set clearer expectations for managing conflicts arising from the provision of non-trustee services and independence from the sponsor. 

 

In line with the APPT’s code of practice, TPR should put the onus on individual trustees rather than the firms they work for to ensure a consistent standard of trusteeship for all pension schemes. Professional trustee firms are mindful that no trustee should be constrained in their individual appointments by internal policies and processes. There was only one suggestion that the engagement programme is an opportunity to guard against ‘group think’, despite TPR saying that it’s important for trustees to challenge group think. 

 

An area likely to divide opinion is the need for a higher bar for accreditation versus stronger regulation and ongoing compliance. TPR’s strategy spans a period when trusteeship is changing, and it should be future-proofed. Over the past 15 years governance structures have shifted from large boards largely made up of lay trustees, to smaller boards; around half include representation from a professional trustee firm. 

 

Today’s professional trustees often have a pensions background – they might be former actuaries, lawyers or pensions managers. Firms are starting to bring in more career trustees, including those entering as graduates. A consistent and robust entry bar for professional trustees, which works for sole traders and the largest firms, is no mean feat. The firms we spoke to marginally prefer this to introducing more regulation. 

 

If you’d like to discuss these changes or explore how we can support you, please get in touch. 

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