TRUSTEE TRAINING Tools of the trade
Ceri Jones, financial journalist, reports on the training available for trustees who have so much to learn in so little time
The obligations on pension scheme trustees have widened in recent years, at the same time as they are struggling to contend with a swiftly changing regulatory environment and a wide range of extremely complex issues that range from sponsor covenants, to enhanced transfer values, age discrimination legislation and the Retail Prices Index (RPI)/Consumer Prices Index (CPI) debate. Training course providers have responded by adding course content to update delegates on the many developments in the market, such as auto-enrolment, the reduction in the annual and lifetime allowances and the removal of the default retirement age, to name a few - see Table.
Arguably, advice on nuclear issues, such as understanding the balance of power between trustees and employer and helping trustees to deal with requests to limit or reduce liabilities, is best handled in an environment where trustees can meet together to discuss experiences and look at case studies.
Consequently, trustee training courses increasingly break down into those that provide a basic but robust understanding to satisfy regulatory requirements, such as the PMI Award in Trusteeship courses run by Capita, Aon Hewitt and Barnett Waddingham, and smaller, regular tailored courses focusing on difficult issues as they arise.
The Pensions Regulator’s (TPR’s) online training toolkit has replaced a lot of the basic training that historically took place when the pensions world was a much simpler place. At AEGON, for instance,
a trustee guide CD-ROM that traditionally was given out to scheme trustees has been replaced by directions to use TPR’s trustee toolkit.
“The trustee tool kit has taken on the requirement of basic training,” says Vivien Cockerill, head of pensions strategy at Wragge. “Training now is often prompted by an event, such as a valuation, where the trustees agree they need training before the next meeting. There was always a role for beginners, but we see less demand for that now and more from trustees who do not want to become out of date, and this fits well with what the Regulator has to say.”
Workshops
Some of those most difficult issues are around defined benefit (DB) closure. “This means trustees need to spend time understanding the options available to secure members benefits, particularly in the face of the desire by many sponsors to de-risk their pension scheme,” says Michael Walker, head of trustee training at Aon Hewitt. “Trustees should spend time understanding some of these options, including buyins and liability management tools, at an early stage so they are ready to respond to their sponsor’s requests at short notice.
“The most important issue for trustee training is making the time to receive good quality, focused training,” Mr Walker says. “There are many ways to do this, including holding a 30-minute training slot as part of the trustees’ regular meetings, attending external training courses, joining teleconferences or attending pensions conferences.”
Jill Clucas of Hogan Lovells says the response to its recent workshop on running a pension scheme, which covered topics such as exercising trustee discretions and dealing with ill health retirement, suggests more training on “nuts and bolts” issues is required in addition to covering new developments. “Steve Webb’s recent statements about trustee responsibilities towards members who are invited to exchange final salary rights for other benefits underlines the need for training in these difficult areas,” she adds.
Pensions law and regulation is complicated and can be confusing for those who have little familiarity with it. “This may be a challenge in itself where the group of trustees includes both member nominated trustees who may not have been exposed to corporate style financial considerations before taking on the trustee role as well as employer nominated trustees who may be from the employer’s treasury function,” says David Griffiths, partner at Eversheds. “The Pensions Regulator is keen to ensure that trustees not just attend training but are also able to demonstrate that they have learnt something. Case studies are useful in testing whether delegates have understood the material they have been presented with.”
Despite the difficult economic climate, many training providers such as Eversheds and Capita report a slight rise in delegate numbers, partly because the turnover of trustees is higher than ever. When a new trustee is appointed, providers such as AEGON are often happy to tailor a bespoke 1:1 session with the trustee at no charge.
Trustees should then put in place a rolling programme of training. “It is not enough to undertake training only when they are appointed as a trustee,” says Sue Curley, Capita Consulting director. “Trustees are becoming more aware of their responsibilities to members of their schemes and know they need to attend training courses, read papers on the latest legislation impacting on pension schemes and have regular training just before their official trustees meetings during the year.”
Training these days is rarely limited to a one off, day long course. Most training providers also offer regular regulatory updates and networking opportunities. The National Association of Pension Funds, for instance, offers trustees free membership of its Trustee PensionsConnection which comprises a dedicated website, regular newsletters and events and an annual one-day trustee conference.
DC training providers
Capita, Aon Hewitt and Towers Watson are among several groups that now offer training in DC investment and scheme structure, such as the current legal framework, administration, member engagement, good governance and the retirement process. Towers Watson’s investment course, for example, aims to give trustees a deeper understanding of a range of investment issues, from top level policy to micro-analysis, including asset types and allocation, through to asset liability management and risk budgeting techniques, and liability matching investment strategies, with a restriction on the number of attendees to encourage debate and discussion.
Auto-enrolment is also fast approaching. “We believe auto-enrolment issues will become the subject of increased future focus by trustees as we approach the effective date and have created a Pensions Reform section on our website to try to help trustees in this respect,” says David Pilley, proposition management consultant at AEGON. He believes more training is generally required for both the default retirement age and CPI/RPI indexation.
Working knowledge
Sponsoring employers could also benefit from training. “We should also be looking to expand the technical and organisational knowledge to the sponsor side – they need to better understand the issues facing trustees and understand how to work with them,” says Andrew Reid-Jones, partner at Quantum Advisory. “This is always best done when conflict is at a low level – you don’t want to be learning it in the heat of battle.” He also makes the important point that: “It is all well and good having a technically sound board of trustees, but that is not really good enough – they need the emotional intelligence skills to deliver.”
Governance
“Trustees are also required, under the law, to have a working knowledge of the scheme’s documents, including the scheme rules,” points out Charles Milne, documents and technical consultant at JLT Group. “Trustees tend to focus on the wider, more general aspects of pensions and do not give this aspect the attention it requires. As this knowledge is a prerequisite for good scheme governance, this particular aspect, via bespoke training, should be given more attention, taking account of the Pension Regulator’s drive on governance. A working knowledge of scheme documents, including scheme rules, can only be achieved by bespoke training and is an aspect that trustees need to focus more on.”
“The biggest issue in trustee training today is how to get the balance right,” says Graham Keast, marketing manager at Towers Watson, “how to cover such a vast area in short periods of time for people with limited time and huge amounts of responsibility” – words, surely, with which we would all concur.
Trustee training case studies 2011
Peter Johnson, now retired, has been a trustee for over 25 years with three staff schemes of the property services group, OCS. Formerly chairman of the trustee board for 15 years, he is now an employer appointed trustee. “The course dealt with trustee responses that are rarely tutored, such as the trustees’ discretion in determining whether a member’s ill health qualifies for early retirement,” Mr Johnson says. “These have a legal framework but also a big human element. The distribution of death benefits can pose problems as the paperwork giving a member’s intentions can be very old and may not take account of the member’s current marital status and there may be children from an earlier marriage for whom we have a responsibility to see through full time education.” Mr Johnson found it particularly useful to work through with other delegates case studies that had gone as far as the courts. He feels that a morning course is an appropriate duration for this type of heavy going material. “A well organised morning course finishing with a buffet lunch where everyone is badged and there is an opportunity for networking and sharing trustee experience makes for a well rounded training experience.”
John Insley attended a trustee knowledge and understanding course last October in the London offices of Barnett Waddingham.
“For me, some sections were more relevant than others, especially the sections regarding trustee knowledge and trusteeship in practice,” Mr Insley says. “It certainly was a baptism of fire. I recall that the section on pension scheme investment was quite complex and, as a beginner, I found this difficult.” But Mr Insley praised the organisation and venue and said the speakers were clearly very experienced in their fields.
Peter Anderton* has attended several pension update seminars held by Wragge & Co. over the last four years. “The seminars were in split into two parts, with the key issues presented in the first half,” he says. “In the last seminar, the new pension auto-enrolment requirements were followed by a review of the Hutton Report. The second part was taken up by ‘Best practice for trustees in managing their pensioner population’ and ‘Hot topics’. Complicated issues were broken down into a readily understandable form and the standard of speakers and presentation material was good. “I thought the auto-enrolment session was well presented, especially by Graham Davey, who is an intermediary account manager for Nest. Many organisations, especially the smaller ones, have not yet woken up to the timescales and actions required by the legislation. It is encouraging to know that people like Graham are available to give advice.
“We were also given a quiz sheet to complete to see if we understood the content of the presentation, with a prize given as an incentive to complete it.”
David Pearce, chairman of the Delta Pension Plan and a trustee of 20 years’ standing, also attended one of Wragge’s six-monthly updates on pension issues. He highlights as particularly useful presentations on workplace pension reforms and the launch of Nest, managing pensioner populations and coverage of a number of “hot topics” which included a summary of the CPI/RPI issue as well as updates on legal cases which could have implications for trustees and employers. “The seminar was helpful in providing timely updates for trustees of developments within pensions and trust law” he says, “and was held in a professional but relaxed manner, encouraging participation, ongoing discussions and feedback on the topics covered.”
Having spent over 22 years in the pensions industry, Gerard Cosker took up a position as member nominated trustee of the Capita Group Money Purchase Scheme on April Fool’s Day this year, coincidentally his 40th birthday. The most recent course he has attended was the First Principles course run by Capita Hartshead at their office in Blackfriars Road, London in June. “The course was taken by Richard Butcher of Pitmans Trustees, whose relaxed manner made everyone feel welcome and that no question would be classed as too stupid,” Mr Cosker says. “For one group exercise, we had a set of scheme rules for an imaginary scheme and a series of scenarios that required us to ensure that we acted within the rules (eg a death case where the member was unmarried at time of death, but had a long term partner and two dependent children). These exercises were great as they showed the importance of learning to work within the rules of a scheme and to ensure that any actions taken are in line with these rules. “The course also covered trustees’ personal liabilities, gave basic details of the life of a pension policy, investment strategy and the need to ensure that we act in the best interests of the scheme members at all times.” |
- Issue:
- September 2011
Author: Ceri Jones
Ceri Jones has been writing about pensions for 25 years, first editing Pensions & Employee Benefits magazine and subsequently the FT's Pensions Management magazine in the mid-1980s.
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