Survey

Certified success

Trustees are demanding more formal training. Ceri Jones, financial journalist, surveys the available courses

Under the terms of the Pensions Act 2004, trustees are expected to be familiar with the laws relating to pension schemes and trusts, and the documents governing their own scheme, and understand the principles behind funding and investment.

This requirement has been given the title "Trustee Knowledge and Understanding" (TKU) and forms the basis of most trustee training courses.

Keeping abreast of the changing landscape has never been more critical as the economic climate is tough and final salary scheme closures bring with them difficult issues.

The financial crisis has, for instance, highlighted sponsor covenant, where there is an overt obligation on trustees to have frank and honest dialogue with the employer.

Trustees also need to be able to identify conflicts of interest and manage them effectively.

The most obvious conflict is between the finance director and trustees over costs, but there can be several potential conflicts of interest pulling in opposite directions, such as when a financial director is also a shareholder or beneficiary. On top of this, investment structures are increasingly sophisticated, such as liability driven investment and buyins, and trustees also face the relatively new responsibility of reviewing their investment advisers every few years.

Demand for training

Demand for trustee training has risen on the back of these challenges.

"Both pre- and post-appointment, trustees are realising the need to receive more formal training, especially with regard to scheme funding and assessing the employer covenant," says Wayne Phelan, managing director at Trustee & Pension Management Association.

"Demand has increased lately," agrees Charles Milne, documents and technical consultant at JLT Benefit Solutions, which had 23 delegates at a workshop on trustee duties in May. "At a time when other professionals are expected to demonstrate continuous professional development, it is logical that trustees, who are often responsible for managing a scheme with multi million pounds of assets, are subject to similar requirements.

"The Pensions Regulator has brought a new dynamic to trustee training – constantly reviewing subject matter and setting new demands in response to a rapidly changing economic and pensions environment," says Mr Milne. "This raises a number of specific issues and challenges for trustees, but against a common single theme – the need to keep up to date continuously."

However, some trustees believe they needed to fulfil the TKU requirement only once, when it was introduced in 2006, and have not grasped the message that the obligation is ongoing, as highlighted in the Regulator's Annual Governance Survey, adds Mr Milne.

Course design

While some of the thorniest issues concern final salary schemes looking to manage their risks, some courses focus on the needs of defined contribution schemes and cover issues such as administration, investment and auto-enrolment. Several forward thinking providers offer training free of charge with lunch thrown in, which can be a wonderful opportunity to exchange experiences. Some training providers put a lot of effort into designing the course content so delegates come up against issues they might experience in practice.

"It is not enough to stand in front of a group and repeat a syllabus; it has to be focused to what is relevant but also bearing in mind the psychometric dynamics within a group," says Andrew Reid-Jones, partner at Quantum Advisory.

"A dominant character can have a big impact on decision making, even though they are not necessarily any superior in terms of knowledge or decision making abilities than others in the group."

Most of the courses provide ongoing materials to keep delegates abreast of subsequent developments, varying from newsletters to online updates. Aegon, for example, addresses this via its DB Matters newsletter and electronic copies of legislative updates.

Bespoke solutions

One decision in training is whether to undertake a course with the scheme's own advisers, or to look elsewhere for a fresh perspective.

Your own advisers will already be familiar with the scheme's profile and will tailor the course content to cover issues pertinent to the individual scheme. But arguably trustees have a duty under the Regulator's direction to robustly question their adviser's recommendations, and obtaining a different slant on issues is a healthy practice that will add a new dimension through learning of the experiences of others.

Some issues require bespoke solutions, however. For example, trustees need to understand how the pension scheme security fits in the wider context of the sponsor's business. Similarly, under the TKU, it is essential that all trustees fully understand their own scheme benefits and documentation.

"This is knowledge that has often been assumed in the past and not focused on in training," says Karein Davie, consultant at Hymans Robertson. "It is, therefore, important to undertake bespoke training that focuses on the intricacies of each scheme as well as taking part in general courses. For example, I wonder how many trustees really know what their early retirement rule says?"

Comprehensive syllabus

The Pensions Regulator's (TPR's) own Trustee Toolkit is widely considered the benchmark level of competence and its scope document acts as a syllabus for pensions training, helping trustees measure their understanding against the level required.

Indeed, according to Vivien Cockerill, head of pensions strategy at Wragge &Co, TPR's Trustee Toolkit is so comprehensive that it amply suffices for beginner training.

"We decided a few years ago, having worked with the Regulator on the Trustee Toolkit, that we would no longer offer beginners' trustee training, mainly because the Trustee Toolkit does the job," she says.

"We see our role as supplementing the beginners' training by assisting trustees with the scheme specific elements of TKU via bespoke training and with regular refresher training focused on pensions and trust law."

Certificates of achievement

Many of the courses offer certificates of completion and some are designed with the Pensions Management Institute (PMI) awards in mind (see Table). For those who want a qualification, for example, delegates who attend Hewitt's PMI Award in Trusteeship revision courses, regularly average a pass rate of over 90%.

"The Regulator is keen to ensure that trustees not only attend training but are also able to demonstrate that they have learnt something," says David Griffiths, partner at Eversheds. "This can present a challenge for those running trustee training. It is no longer sufficient merely to award a certificate to each course attendee.

"Our trustee training aims to address this issue by encouraging delegates to comment and ask questions.

"In addition, case studies are designed to test whether or not delegates have understood the material, and we generally find delegates are keen to express their views."

Ceri Jones is a financial journalist; ceri.j.jones@btinternet.com

Delegates reunited

Paul Heer, contracts manager, sewerage ops at Severn Trent, is the longest serving member nominated trustee (MNT) in a FTSE 100 company. "I have found the recent developments and legislation connected with the role very onerous," says Mr Heer. "Keeping up with the day job, which is punishingly hard in recent times, and keeping up with the piles of legislation and regulation on pensions is becoming quite worrying and part time unpaid trustees such as myself are questioning the ability of carrying out the role to the standard rightly expected.

"Aviva's approach to free trustee education is fantastic. It's hard enough recovering expenses for courses in recent times let alone to gain approval for course costs.

"In June I attended a course on macro-economics at Aviva's London offices by Bank tube station. It was fascinating and topical. I came away with a better understanding of the economy and why the City behaves as it does. "The opportunity to network with other trustees is brilliant. Each trustee shares the challenges they face in convincing younger members of their scheme just how big this benefit is and defending the position as younger newer entrants to money purchase schemes can feel like second class citizens compared with older members on final salary schemes."

David Ayrton, a MNT for the National Union of Journalists pension scheme, has attended the Aviva Investment Tutor training for a few years and found the courses "incredibly helpful in coming to grips with an area of knowledge which I had previously not encountered. The courses make full use of Chris Wagstaff's s considerable skills as a tutor as well as those of guest expert academics, economists and pension specialists," Mr Ayrton says. "The courses are aimed at the educated lay trustee with an enthusiasm for developing knowledge on investment. There is always ample opportunity to ask questions and clarify points in an atmosphere of encouragement."

Patricia Mulcahy, of St Paul's School pension scheme trustees, attended a Barnett Waddingham course in Cheapside, London, in March. She says the study pack was so comprehensive, it could stand by itself. "The key documents are all there and you're given clear instructions what to master. 10 out of 10 for that!" she says.

Mrs Mulcahy has attended two courses in two years and says the presentation depends on the individual speaker – some are more confident than others, but if a speaker is not so experienced, there will be a mentor at the back of the room, dealing with any questions the presenter is unable to answer.

"The course was very thorough," she says. "There is much to understand." Mrs Mulcahy also worked her way through TPR's own online Toolkit last year and says it was helpful but took many hours to complete, so she broke it into three–four hour sessions each day over the summer holidays.

James Rawson, a member nominated director of Invesco Pension Trustees, attended a Hogan Lovells' course on the recommendation of a colleague. "My aim was to gain a wide understanding of the role and responsibilities of becoming a trustee and to ensure that I was equipped to do the best possible job in this responsible position. The course fulfilled this aim and was thoroughly enjoyable!

"I went on to attend a variety of different Hogan Lovells' courses – from short breakfast briefings to half day workshops – all of which provided topical, pragmatic information and training. Key topical issues spanned from auto-enrolment, pension legislation and discrimination law to the raising of the minimum pension age to 55. A relaxing intimate setting, combined with the structure of the workshops, brought out how other trustees approached the resolution of issues, and this has been particularly useful."

Mike Furbank, benefits manager to the industry wide coal schemes, has also attended courses run by Hogan Lovells, the schemes' legal adviser. "Not only have I been on seminars run by Hogan Lovells, a number of our trustees have. We always receive good feedback on the value of the courses. I myself attended a workshop on s75 recently and found the balance between the theory and practical application of the legislation just right. The facilities and speakers were both of a high standard and the opportunity to listen to other delegates from a wide range of schemes was particularly welcome."