Industry should act on small scheme problem
Trustees are struggling to cope with the pace of change in the pensions industry, experts suggested at Workplace Pensions Live.
The problem is particularly acute among small pension schemes, said David Weeks, co-chair of the Association of Member-Nominated Trustees (AMNT). “We at the AMNT represent around 700 of the total trustees who represent about a third of the 2trn. We get a perspective on the top end of the trade as it were. If you talk to the Pensions Regulator, they did interviews for their 21st Century Trustee project, they got about 850 interviews who were at the top end of the trade.
Schemes often also lack the clout and understanding to negotiate better investment costs on members’ behalves
“We worry about the tiers below that, the big number of schemes who perhaps don’t have many advisers, how they are coping. That is something we need to look at collectively as an industry,” said Weeks.
With investment getting more and more complicated, schemes can end up relying on their advisers, added Elizabeth Gane, pensions partner at law firm Gowling.
“When it comes to items like investment, the adviser and consultant have very strong powers within the scheme. That in part is because scheme investments are becoming more complicated.
“They will come to the trustee board with an idea or suggestion and it is a very complicated idea in some cases. In some cases, it is not fully understood and in that sense, trustees are often very heavily led by their adviser.”
Schemes often also lack the clout and understanding to negotiate better investment costs on members’ behalves, said Tim Sharp, policy officer at the Trades Union Congress. “If we want to improve that situation we have to look to structural reforms, along with greater investment pooling to enable the power to move more towards members.”
There is a dearth of chief investment officers would bolster trustees’ technical knowledge and help them to interrogate their investment managers, suggested Chris Hogg, chief executive officer of the Royal Mail Pensions Trustees. “It is a tiny proportion of schemes which have that expertise in house … No-one’s going to take the right decision every time but if you get the structure right you can improve outcomes.”