There are many thousands of people and companies acting as trustees of occupational pension schemes in the UK. These trustees are required by law to maintain an appropriate level of knowledge and understanding but, unlike the actuaries, lawyers and auditors who assist them, there is no requirement for trustees to gain any specific qualification before taking on the role.
The role of pension scheme trustee has traditionally been carried out by representatives of a company’s management and its workforce. However, in recent years the increasing complexity of pension scheme regulation has seen a substantial increase in the number of individuals and companies who offer their services as specialist pension scheme trustees (“professional trustees”). This has been seen generally as a positive development across the industry with professional trustees increasing the standard of scheme governance and thereby improving the security of members’ benefits.
The Pensions Regulator’s 2016 discussion paper on “21st century trusteeship and governance” highlighted a number of interesting points about the changing nature of trusteeship. In summary, whilst few respondents felt that mandatory qualifications were appropriate for lay trustees, many people believed that the unregulated nature of the professional trustee market was a concern given the increasingly important role that these trustees play within the industry.
No proposals have yet been made to implement any of the suggestions made for regulating professional trustees (for example, adopting minimum qualifications or introducing a professional regulatory body). However, the Pensions Regulator has issued guidance which explains that it intends to hold professional trustees to a higher standard when it is exercising its powers and, as a result, has consulted on what it means to be a professional trustee.
The outcome of that consultation is reasonably straightforward. The Regulator considers “a professional pension scheme trustee to include any person, whether or not incorporated, who acts as a trustee of the scheme in the course of the business of being a trustee.” In other words, if someone sells their services as a professional trustee, they are likely to be a professional trustee.
There are, however, some areas of potential ambiguity which the Regulator has clarified:
- Even where a trustee is being paid, the trustee will not normally be considered to be a professional trustee if they have been a member of the scheme or an employee of the scheme’s employer, provided they do not also act as trustee to unrelated schemes.
- Where a trustee has experience by virtue of being a trustee of a specific scheme for a long period, this will not necessarily lead to them being considered “professional” unless they use this experience to promote themselves as trustee of other, unrelated schemes.
Trustees must notify the Regulator of their status through their scheme’s annual return so it will be important for an assessment of the status of each trustee to be carried out based on the Regulator’s guidance before the submission of the next annual return.
This blog post was written by Stephen Maynard. For further information, please contact:
Stephen Maynard, associate, Pensions
T: 0161 836 7792