Is AAF fit for today? What should Trustees be considering?
Is AAF fit for today? What should Trustees be considering? AAF 01/20 reports began appearing
Focusing on Trustee Knowledge and Understanding in a Changing Governance Landscape
The pensions landscape is changing. The transition from DB to a DC funding model in the private sector is well underway, and the DC market itself is transitioning to a more mature structure, characterised by bigger schemes. Change is also being accelerated by the Pension Schemes Bill currently before Parliament. Amidst this change, one thing remains constant: the importance of good governance – with trustees needing to have the skills and knowledge to navigate the changes to come, whilst always keeping the best interests of members in front of mind.
As a provider of professional trustees for over 25 years, Pi are acutely aware of how much the pension landscape has changed, with changes including consolidation within the adviser and professional trustee market; the development of new models such as master trusts, superfunds and CDC; and of course, increased use of technology such as pension dashboards.
All of this has expanded the scope and complexity of trustee decision-making. Trustee Knowledge and Understanding (TKU) has long been a cornerstone of the UK’s trust-based pensions system. The DWP’s consultation on trustee governance reflects growing interest in whether current arrangements remain fit for purpose as schemes, markets and regulation continue to evolve. We are strongly supportive of ensuring that all trustees have the standards and skills needed to deliver a modern pensions system that works harder for savers, and supports UK economic growth. As the pensions landscape rapidly evolves, trusteeship, governance and administration standards must keep pace.
The current TKU framework retains important strengths. Fiduciary duty continues to provide a clear focus on member interests, while diverse trustee boards support effective challenge and decision-making. Existing tools, guidance and qualifications provide a foundation for trustee competence.
At the same time, challenges persist. Resource constraints, competing time pressures and increasing regulatory complexity can limit effectiveness, particularly for smaller schemes. Trustee supply, succession and diversity remain live issues. The expanding role of professional trustees also raises questions around conflicts of interest and market concentration.
At Pi we believe that any future approach will need to balance higher expectations with proportionality, support both professional and lay trustees, and preserve the distinctive value of trusteeship while adapting to a more complex and consolidated pensions system. Trustees, governance advisers and pension managers will need to keep abreast of changes as they develop in practice.
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