When can you call a trustee “independent”?


It is quite easy to be an independent trustee. You need no qualifications, you need no expertise , the capabilities you need are negative.

you must not be a member of the scheme

you cannot be connected with the sponsor

you should not have connections with the suppliers to the scheme

Theoretically that makes you “unconflicted” and independent. But in practice things just aren’t that simple.

In the tight knit world of institutional pensions, the network of relationships that governs appointments creates a web of dependencies.

To become successful, a trustee can either be iconoclastic (think Alan Pickering) or be consensual. The iconoclast who demonstrates conviction is a rarity, it is a risky business employing such a person.

But the convergence of trustees toward a consensus does not demonstrate independence, precisely the opposite. Indeed if we expected uniformity of behaviour among our trustees, we could mechanise the job.

We do not have robe-trustees, but we do have a prevailing orthodoxy among independent trustees – especially in DC.Since most employers who participate in DC schemes now use multi-employer trusts or rely on the offices of Independent Governance Committees for governance., much of the traditional role of the independent trustee is lost.  There is no conflict with the sponsor to avoid , nobody to be independent of.

Theoretically independent trustees have no employer, they are paid by the sponsors of the plan -the employer in “own trust” arrangements and the entity that owns the master trust where there are multiple employers -lets call it the provider.

But whereas the conflict between an employer and a trustee is obvious – and easy to detect, the relationship with a master trust provider is difficult.

The fundamental conflict is that a trustee can only be paid from the profits of the master trust, and the greater the profits, the more the independent trustee can be paid.

Last night i spoke with the Chairman of the Trustees of one of our largest master trusts.

“How’s it going?” – I asked

“Oh very well – we now have 600,000 employers and more employers than anyone else”.

Clearly the mindset of this Chairman at this meeting was focussed on the marketing of his trust.

He could have answered

“Oh very well, we are meeting our investment targets and members are very happy with their service”.

But I don’t think that’s what Chairmen of Trustees think. And it’s because their interests are aligned with the commercial success of the provider more than the outcomes for members.

This may be a little unfair, one of the considerations of any master trustee must be to ensure the long term security of member’s interests and this is dependent on the success of the trust’s business model.

However, I am only being a little unfair. The long term success of a trustee is measured in the outcomes delivered to members.

I fear we are seeing a new breed of independent trustees who are little more than an extension of the provider’s management and that is anything but “independent”.

How can we ensure that we have trustees who are acting in the interests of members (as well as of the trust as an entity?

The obvious answer would be to allow member’s to choose their own trustees. I could easily name my squad!

If I wanted a safe pair of hands at the back, I’d look for the evergreen Tony Filbin– a replete custodian

For my doughty centre backs , I’d pick a couple of heavyweight bruisers – step forward Martin and Paul Lewis.

I’d want agile and athletic wing-backs – Alan Higham and Andy Young would be my picks!

Worryingly I have an all male back five and I’d even things out by having an entirely female midfield picked for their brains – tenacity and guile.

Jo Cumbo, Stella Eastwood, Jocelyn Blackwell, Debora Price and Kim Gubler

And for my striker , I would pick the inimitable Tom McPhail.

There are many others I would have in my squad, all equally awkward and disinclined to tow any party line.

Step forward Mick McAteer, Rita Powell, Gregg McClymont and  Michelle Cracknell.

What have all these people have in common (apart from being good eggs)? I doubt that between them , they can muster more than a handful of trustee positions!

And this is the sadness. The homogeneity of trusteeship means that those iconoclasts who stand up for the interests of members – are largely ignored by the large master trusts. If I saw any of my team – or squad players – on the board of a master trust – or sitting on an IGC, I’d jump for joy.

It isn’t going to happen right now and that’s because nobody has the right to shout as I am shouting for their inclusion!

Were they to have positions as fiduciaries, the interests of members would undoubtedly be promoted as a counter-balance to the commercial interests of the trustees, because my team and squad are genuinely independent.

I don’t think the same can be said of most master trustee boards that I come across – and sadly I can say little better of the IGCs.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to When can you call a trustee “independent”?

  1. George Kirrin says:

    Henry, you raise an interesting contrast between the “iconoclastic”
    and the “consensual”.

    I fear the best we can expect from such paid trustees is that they be “professional” rather than really “independent”.

    Don’t overlook the role of the headhunters either, as recruitment consultants are often retained by the larger schemes.

  2. Bob Compton says:

    Again Henry you have taken the thoughts right out of my head. Well said.

  3. As a trustee looking to make a difference, particularly in the DC area, I would suggest that whilst there may be some trustees who fit Henry’s description (and some are too many) there are those for whom achieving good member outcomes, offering investment choices that achieve results and don’t cost the earth are what we are about.
    The trick for Master Trusts in particular is the balance of power (which Henry hinted at) between provider and trustee. But I don’t see a lot of difference between an employer with a DB scheme and the trustees in this regard. Independent Trusteeship is not easy and maybe there needs to be some further thought as to how those that don’t seem to act in the interests of the members can no longer operate.

    • George Kirrin says:

      Ultimately, trustees who don’t act in the interests of the members are in breach of trust.

      Some member-nominated trustees are still elected/re-elected. If someone has a low cost way of introducing a similar voting mechanism for members about so-called “independent” trustees, I’d welcome thoughts. Votes of confidence, or no confidence.

      • henry tapper says:

        I think the vote of confidence is very important, social media has a part to play in engaging people in what is going on and I hope that trustees and IGCs will be asking their membership not just what they think of the job they are doing, but what they think of them!

        Maybe that’s a little fanciful but it’s the kind of thing people like us should be demanding.

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