15/06/08 The Training Trustees Demand
15 June 2008
For brand new trustees the priority is covering the legally required range of knowledge. The deadlines are quite tight: the Regulator has published scope guidance, which lists the areas of information they need to be familiar with within six months. It pretty broadly covers the law relating to pensions and trusts and the principles of scheme funding and investment – all the basic fundamental principles of being a pension scheme trustee.
For existing, experienced trustees it varies. Priorities should reflect where in the cycle of existence their pension scheme is. For example, for a scheme rapidly approaching its first scheme valuation the trustees would need urgent training on actuarial valuation so they can understand and engage in the process with their advisers as required.
Aside from that the Regulator has highlighted its priorities for the coming few years:
- DB funding
- DB and DC governance
- DC risk (right type of risk at the right time)
- General risk management of occupational pension schemes(identification and management)
Another hot topic, particularly for DB trustees, is conflicts of interest – including the nature of those conflicts and the strategies for mitigating them.
Trustees also need to understand the strength of the employer covenant. This is a relatively new area for trustees, but if you read the codes of practice and legislation it becomes apparent that trustees really need to understand almost as much about the financing of a business as its board of directors do. Trustees are not going to know how to go about that unless they have had training.
There is a huge time commitment but it is worth it. Most employers are responsive to this need – there are very few that object to spending time on trust matters. Those trustees that have learnt about all of these areas find the job interesting and challenging – although I appreciate it is getting increasingly difficult to achieve this.
From Engaged Investor Magazine (June 2008)