In the final part of our investigation into IGCs, Louise Farrand explores whether the omission of fiduciary and legal duties leaves IGCs unable to function properly
How far should Independent Governance Committee board members be accountable for the decisions they make? Trustees must give members the very highest standard of care – and are on the hook if they fail to deliver it – because of the principle of fiduciary duty.
Yet members of IGC boards will not be subject to fiduciary duty – which Margaret Snowdon, chairman of the Pensions Administration Standards Association calls the proposals’ biggest weakness.
She says: “On the surface, there is nobody with any representative interest apart from the treating customers fairly principle for providers. [However] I’d rather we walked and walked successfully rather than trying to run and making a complete hash of it.”
Snowdon also points out that IGCs do have a duty to act in the interest of members and to assess value for money.
Sackers’ Helen Ball says: “Really, I think many [IGC board members] will come from the occupational scheme world, and there you are brought up with the idea that you have a responsibility to look after members’ money, which is essentially what fiduciary duties are.
“I think they’ll take that with them when they go into their role on the IGC. The fact that there isn’t a fiduciary role that’s written down probably isn’t the end of the world.”
Snowdon points out that “one thing is missing in addition to fiduciary duty: there is a legal duty to have knowledge and understanding on the trustee side. The IGC requirement is just expertise and experience, which is a little bit non-specific.”
Chris Daykin, trustee director of master trust NOW: Pensions, has a different take on the limits of the FCA’s specifications. He says: “Although there’s an overarching responsibility to act in the interests of members, it’s a more limited conception of what that means. The Regulator has come up with 31 quality features; the FCA paper talks primarily about looking after value for money, so it’s cost-orientated.”
“The IGC requirement is just expertise and experience, which is a little bit non-specific”
Harrison, meanwhile, questions the FCA’s definition of value for money. She says: “Value for money is a phrase that’s bandied around a lot in the consultation and elsewhere in government documents, but it’s not very clearly defined. I’d certainly like to see it clearly defined.”