Catherine Gill, institutional business development at Newton Investment Management looks at the biggest challenges facing Independent Trustees in 2018
In this year’s survey and analysis, we focus on three key topics that are relevant for all trustees: the relationship between trustees and their advisers, sustainable investment, and future directions for defined benefit (DB) and defined contribution (DC) schemes.
While trustees generally enjoy good relationships with their advisers, we found that sustainable investment is one area where they would like more information.
With so many other investment and governance issues for trustees to consider, it is unlikely to appear on board meeting agendas unless advisers make a point of highlighting sustainable investment to their clients.
Greater involvement from advisers will also help trustees – both independent and member-nominated – to develop a fuller understanding of what ‘sustainable investment’ really means, and how it might differ from the ethical investment approaches of the past.
Almost half of our survey respondents believe that sustainable investment is relevant to both DB and DC schemes, but when it comes to actually switching assets into sustainable funds, there is still a long way to go.
In DC schemes with more diverse memberships, sustainable strategies may be adopted sooner than in DB. Younger savers are generally perceived to be more concerned about how and where their money is invested than older members, but that has yet to translate into greater engagement with pensions.
Perhaps the next challenge is to encourage even more diversity on trustee boards, particularly when it comes to age, gender and socio-economic background.
For DB respondents, improving funding levels and the strength of the employer covenant were the two biggest challenges
We also asked our respondents what single thing the schemes they work with could do better. The answer remained consistent with our 2016 and 2017 Independent Trustee Research surveys: make decisions more quickly.
That might reflect the continued traditional cycle of quarterly trustee meetings, but evolving models of trusteeship (such as sole trustees) and new technologies could help to speed things up. Highly effective chairing and board leadership is also critical to ensure decisions are made in a timely manner.
For DB respondents, improving funding levels and the strength of the employer covenant were the two biggest challenges.
For their DC counterparts, unsurprisingly the most pressing concern continues to be member engagement, with almost a quarter of respondents putting this top of their list of challenges.
Coming a close second was appropriate default fund design, which is particularly important given that over 90% of members typically invest in a scheme’s default fund. This is likely to remain the case for the foreseeable future, so it is crucial that trustees, consultants and investment managers work together to promote the beneﬁts of regular saving for retirement.
To download the full research report click here.
Catherine Gill, institutional business development, Newton Investment Management