Independent Professional Trustees: Who are they, how do they work and what value do they add?

Independent Professional Trustees are increasingly employed to help manage pension schemes, leading to significant growth in their numbers. But who are these professionals and what value do they bring to the pension table?

Who can be an independent pension scheme trustee?

While the job title is largely self-explanatory, it is useful to delve deeper into the attributes and experience that make a successful Independent Pension Scheme Trustee. In many cases, alongside role-specific qualifications, Professional Trustees have previous relevant experience, for example as: Pension Scheme actuaries, lawyers, HR experts and covenant advisers. This knowledge and understanding of the industry can be invaluable in managing Pension Schemes in a Trustee capacity. The role requires effective communication skills alongside considerable organisational and management expertise, to ensure seamless coordination of the many parties involved in the complex work required to run a Pension Scheme successfully.

Should I employ independent professional trustees?

Specialist expertise and additional resource are among the many benefits of having an Independent Pension Scheme Trustee on board. As well as reassuring the Trustee board, Employer, Scheme members and Regulatory Authorities that the Scheme is well managed and compliant with regulations and guidance, their presence also allows the Employer to focus their precious resource on successfully managing the core business.

Of course, the benefits of employing a Professional Trustee need to be balanced against potential disadvantages. Additional costs need to be weighed against the advantages of freeing up internal resource, and the risk reduction which can be realised through Professional Trustee involvement. 

Concerns are also sometimes raised that the appointment of a Professional Trustee will lead to a loss of operational control by the employer, with an associated increase in the level of governance and professional advisory fees required, perhaps for independent covenant assessments or additional legal input to regulatory requirements for example. Whilst this situation can arise, we would expect the Independent Trustee to work both collaboratively and proportionally, prioritising spend where it adds most value and being cognisant of budgetary constraints.

The greater pension knowledge and experience of the Professional Trustee can also lead to more efficient and strategically focused Scheme management, including the consideration of more courses of action than would otherwise be achieved based on the Professional Trustees’ experience and knowledge, ultimately saving both time and money.

How can Professional Trustees help your Scheme run more effectively?

There are three main ways in which a Professional Trustee is employed, each with its own pros and cons:

• Professional Trustee within a Trustee Board, but not Chair
• Chair of a Trustee Board
• Sole Trustee

The provision and delivery of specific services can vary widely within each approach, as can the degree of operational control the Independent Trustee assumes. It is therefore crucial that as part of any Professional Trustee appointment, the objectives of and benefits to the Trustee Board and Scheme’s Sponsor are carefully considered and matched by the approach to be taken. 

Our aim at Pi Trustees is to work closely with each client to realise these aims; tailoring the services, delivery, and selecting the appropriate individual Professional Trustee, to optimally meet specific Scheme needs.

In future articles we will explore the three specific approaches set out above in greater detail. At this stage, however, it is worth noting that the Sole Trustee approach is currently gaining particular interest, especially for Schemes where there is:

• A clear objective to buy-out or otherwise discharge the Scheme’s Liabilities.
• Difficulty finding suitable lay Trustees to fill Trustee Board vacancies.
• An overseas parent to the Scheme Sponsor resulting in a lack of UK specific pension knowledge.
• A desire to focus employer resource on managing the core business rather than the Pension Scheme.

Contact us for additional information on the role of Professional Trustees and Scheme Managers if you wish to discuss your requirements in more detail