Yesterday I gate-crashed two parties. Party one was held by the association of professional pension trustees at the Butchers livery Hall and party two was held by the association of member nominated trustees around the corner. Both parties were in the City and both APPT and AMNT were discussing the same thing- the relevance of trusteeship in 21^st century UK pension schemes.

I have recently written that trusteeship, as we know it, has little to offer. The traditional skillset of Defined Benefit Trustees is about ensuring that what has been guaranteed to members is paid to members.

But the new world is not about guarantees, it is about meeting member’s expectations. The new trustee will be doing his job by working out what his or her member’s expect and managing those expectations about what can be reasonably delivered.

Morning –  

At the APPT meeting, Mark Hoban spoke cogently on this subject. It would seem he understands the connection between the employer, the employer fiduciaries and the management and delivery to member’s expectations. I have heard Hoban speak before, usually in a hostile environment but yesterday I heard a conservative politician articulate the coalition’s agenda with precision and enthusiasm.

I did not have time to see how this went down with the professional trustees in the room, but I didn’t get the impression that they had quite got the import of Hoban’s message. There remains in this community’s approach to DC an aversion to change which can be summed up by an excellent quote I’ve snipped from an article by Frances Denmark

The “lifetime income strategies” in question refer to a concept being pioneered by Robin Diamonte, CIO of the UTC pension plans (who manage around £3. bn in UK pension plans). I will write more about LIS in future blogs as it is an attitude to DC investment that is very much about delivering to member’s expectations.

For Professional Trustees, the new ideas around risk-pooling, risk-sharing and concepts such as CDC and income drawdown seem full of risk with little opportunity. I suspect that the members of the schemes they are supposed to represent see things the other way around!

I suspect Mark Hoban sees things more from the member’s point of view.

What is important about the Hoban view of trusteeship is that it is founded in understanding what pension plan members want and managing around what they can reasonable expect.

For the professional trustees in the room, the agenda has been different , their agenda has been to keep schemes able to meet the promises that have been made and to manage compliance with regulations around those promises.

The change in mind set to considering risk in terms of not meeting member expectations does not appear to have happened (yet).

Afternoon –

After a morning with the APPT, I legged it across the City to the posh offices of Sacker & Co, who were hosting a meeting of the AMNT.

I know many of this lot, they are by and large union sponsored fiduciaries whose agenda is very simple- to ensure that members of their schemes get paid what they are promised. Because they are not paid for by the sponsor (like the aforementioned professional trustees), their focus is much more member focussed.

In theory, they should understand the new pension freedoms in terms of the member’s reasonable expectations and should be considering DC as a great opportunity to help. But as with the APPT I didn’t really feel the people in the room got it. I hear a long presentation about Captain Bob Maxwell and how his pension plans had been messed about with. There was a talk about how member representative would be increasingly involved in the management of the Local Government Pension Schemes and there was a brief run through the legislation surrounding the new insurance fiduciary bodies- the IGCs.

But I wonder whether there is the energy within this group of (mainly retired) pension veterans to really take forward their vision of “protecting the member’s interests” into DC. In truth, I sensed they found the world of IGCs a little challenging.

The change in mind set to considering risk in terms of not meeting member expectations does not appear to have happened (yet).

So what was my conclusion after a day with the corporately and union sponsored trustees?

I fear my original position, articulated in my blog “so what’s the point of the DC trustee” holds true. Really understanding the implications of the risk transfer from DB to DC means changing the whole way you do things. It takes a Robin Diamonte, or a Mark Hoban to see this. Interestingly both figures are from outside a pensions background.

For me, the most useful information on how to run a DC scheme is fed back from the SMEs and Micros I consult through www.pensionplaypen.com and through the financial education work we do through First Actuarial. You cannot understand what members want by sitting in the Butchers Hall or Sackers offices. The AMNT do at least talk to their members ( I sense the APPT don’t) but the headwinds for both groups of trustees are immense.

We need a new kind of fiduciary, people like Michelle Cracknell who have never been in DB and come at pensions afresh, people like Mark Hoban who have a genuine interest in improving outcomes and can talk about bringing the new technologies to the help of old problems.

I am confident we will find these people- the public service ethos in this country runs deep. But I do not think we will find them from the APPT and the AMNT.