There’s nothing like a pandemic to keep pension trustees on their toes.
Although I must admit to not being particularly conscious of that before the spring of 2020. The impact of Covid-19 on pension schemes, their sponsors and their members is wide and varied. It’s making the workload for a typical trust-based pension scheme board demanding.
A colleague from another part of the Punter Southall group asked me if the pandemic was hastening the demise or reinforcing the role of member nominated or other lay trustees. It is an interesting question and the answer, like so many, isn’t digital.
The priority of pension trusteeship
It’s true some lay pension trustee boards may be struggling, even if not solely through a lack of knowledge or experience to deal with the issues and take the big decisions needed. Many individuals face other significant demands and pressures on their time, which are likely to have increased through this Covid period, effectively moving their pension trustee role down the priority list. Many of the more experienced lay trustees are the finance director (or similar) of the sponsor. For some pension schemes this heightens the potential for a conflict of interest and increases risk.
However, this doesn’t apply to all. Some lay trustees have used time whilst furloughed to refresh and improve their pensions knowledge and play a greater role in decision making than they would have in the past. For them, trusteeship has moved up the priority order. (Generally, lay trustees who are unremunerated for their role and whose employment contracts don’t specifically reference their trustee role, could continue to act as a trustee while furloughed – I won’t go further into the technicalities here.)
In need of a guiding hand
Whilst some other professional trustee firms are using the pandemic as a reason to push sole trusteeship as the ‘right’ solution, I think each scheme, sponsor and trustee board needs to be considered individually.
Member nominated trustees are the only people who can truly think like a member for a particular pension scheme. Losing that completely may make the job harder for the remaining trustee(s), particularly at a complex and difficult time like we’re in now when communicating effectively with members is more vital than ever.
The member nominated and lay trustees I work with are coping just fine (except perhaps in getting to grips with technology as we moved to virtual trustee meetings). Maybe the difference is they aren’t full lay boards. If a trustee board is struggling to deal with the demands it faces, or relying too heavily on advisers, appointing a professional trustee chair may make all the difference. Knowledge and experience gaps are filled without losing the benefits of a broader trustee board.
There’s a very valid role for lay trustees, but the role can be very challenging. A good independent chairperson could make the difference between lay trustees struggling to cope with additional demands placed on them by the pandemic and continuing to do a good job.
For completeness, I think the answer to my colleague’s question is: “both”.