Trustee Boards – The Strategic Dilemma

Improving the ability of Trustee Boards to focus more on strategy is often a key element of Trustee Board Effective Reviews undertaken by Pi. The Pensions Regulator (TPR) details the role of the trustees with a focus on the key fiduciary and governance responsibilities of the Trustee role.

While this is clear on the detail of what needs to be done, how it is delivered and how a Trustee Board ensures that it sets and manages priorities is open to interpretation. 

Understanding and developing a framework that helps achieve a strategic overview is central to good governance and is defined by TPR as covering: 

• Clear, long-term goals for your scheme and interim objectives around key areas of focus including governance, investments (and funding for defined benefit schemes), administration and communications.
• How you propose to meet these objectives and goals.
• How you will measure and monitor progress towards them.

Going forward TPR expects governing bodies to use the proposed annual Own Risk Assessment (ORA) to assess how well their policies and procedures address various risks, financial and operational, that their scheme faces. This is therefore an opportune time for Boards to look at what practical steps can be undertaken to achieve their stated objective of becoming more strategic.

Define ‘Strategic’ 

‘Strategic’ is one of the most overused words in governance. Ensuring all trustees agree a clear definition of what it means is fundamental to a governance framework. 

Have a Clear, Measurable Business Plan 

As stated by TPR, Trustees should have a business plan that covers the trustees’ vision and long-term goals for the Scheme, from which strategic objectives would be set for a period of between one to three years. Monitoring progress against objectives enables trustees to assess progress towards achieving the long-term goals. It is important that this does not become dominated by the annual scheme planner. The most effective Trustee Boards identify the critical matters that must have the board’s attention, and these are then scheduled into an annual agenda which in turn drives the Trustee meetings. 

Maximise Your Trustee Meeting 

Exploration of different scheme and economic scenarios along with potential outcomes and agreeing risk parameters requires time and the full attention of all parties. It makes sense to do this when people are fresh and focused. Reviewing the traditional meeting format and moving such elements as minutes of the last meeting, along with compliance matters to the end of the meeting can help support the Trustee Board in focusing on the critical element of this role as agreed by their definition of “strategic”. Prefacing each agenda item with a clear indication of its purpose and context can also help the Board to focus on its strategic priorities. 

Make The Best Use of Meeting Papers 

Traditionally reports are split between the various components of pension scheme management, administration, actuarial, investment etc. Given the cost of these reports, it makes sense to consider how to get the most value from the information provided. Traditional reports with SLAs are an important component of an audit trail and monitoring but they also need KPIs that consider the likelihood of a desirable scheme outcome that can be used to change direction or even adviser if necessary.

The Role of The Chair 

TPR recognises the importance of the Chair in delivering effective scheme management. Unlike their Corporate Board relation, their fellow board directors often have less relevant experience, limited access to in-house executive team support and therefore tend to be more dependent on advisers and other third-party organisations. Even with the most effective and supported Trustee Board, the role of the Chair to provide direction and ensure the Board organises itself to give quality attention to the things that really matter is crucial. 

The ORA framework should be viewed as a great opportunity to reset for challenges ahead.

Amanda Burden is a Board Director and Head of Pensions at Pi, with over twenty-five years of experience in the pension industry. Amanda has worked with both defined benefit and defined contribution schemes and now focuses on managing complex projects, board effectiveness reviews and the implementation of governance frameworks for trust-based schemes. She is a Fellow of the Pensions Management Institute (PMI), a former Prince2 practitioner and holds the PMI Certificate in DC Governance.