Written by Sandra Wolf- Mallowstreet
Labour's shadow pensions minister, Jack Dromey, is championing the role of member representatives on pension schemes just as the Pensions Regulator is stepping up efforts to get professional trustees on more boards. Speaking at the AMNT’s Summer Conference on Thursday, Dromey also wants to see the establishment of a “fiduciary college” within a university to serve for trustee training, create a trustee federation and ensure trustees have sufficient time off to discharge their duties.
TPR and the industry have for some time been pushing for professionalising the trustee role. The Association of Professional Pension Trustees is due to launch its trustee accreditation framework, while TPR on Tuesday proposed a requirement to have a professional trustee on every board. Currently there are around 9,000 trust-based schemes, projected to reduce to less than 7,000 by 2024, each of which would need a professional trustee.
‘Determined' to push for stronger member representation
In the face of these regulatory and industry ambitions to professionalise trusteeship, the Association of Member Nominated Trustees and Labour’s Dromey are emphasising the need for member representation.
“Whilst it’s important that the voice of the sponsor is heard, crucially, ultimately pension schemes should be to the benefit of their members, therefore the role of member-nominated trustees is of the highest importance,” said Dromey. “That is why, going forward, one of the things we are determined to drive is for that voice to become yet stronger.” He reaffirmed last year’s statement that Labour wants to move from a requirement of having at least a third member-nominated trustees on pension fund boards, to a 50/50 split.
Master trusts and independent governance committees should also have greater duties in terms of member representation, he said, noting that Labour is “likewise with the ultimate goal of moving to 50/50” member representatives. Dismissing the notion that member representation is not practicable on multi-employer schemes, he said he did “not underestimate the difficulties in master trusts... about how precisely how you do it, but I cannot accept that you cannot construct an arrangement” that has member-nominated trustees at its core. Similarly, any future sector-based collective defined contribution schemes – Dromey suggested a scheme for the care sector – should also aim for at least half of the board to consist of scheme members.
Fiduciary college for trustees proposed
However, the quality of member nominated trustees, which has been a thorn in the side of TPR, needs to improve for this to happen, he hinted, and suggested trustees should be trained beyond TPR’s basic requirements in “a fiduciary college within a university”.
Dromey also proposed a trustee federation and stressed the need for time off from day jobs to enable trustees to fulfil their duties. Professionals and sponsors “benefit from having a strong member voice”, he noted, adding: “If the regulator is moving down perhaps a slightly differen path then that is not a path I would agree with.”
DWP open to lobbying on MNTs
David Farrar, senior policy manager at the DWP, said the department is "really supportive" of member-nominated trustees and noted that there is currently no legal obligation for master trusts to have any.
"Government policy at the moment is not to compel them, but if people feel strongly enough, lobby us, lobby ministers, lobby opposition spokespeople," he said.
Farrar also commented on TPR's proposal to have a professional trustee on every board, saying the DWP views this as a "very long range" ambition.
"At the moment there is clearly no possibility of having a professional trustee on every scheme because there aren’t enough professional trustees of sufficient quality. I think there is also a legitimate question to be asked whether every scheme needs a professional trustee if it has suitable skills and experience on the board already," he added.