One of the insistent themes that emerged from the two days of conference I have been at in Scotland is the collapse of the trustee as a representative figure of the member (and worker). This may be because a great part of the “DB Strategic Summit 2025” has been considering the Councillors who take the role in the LGPS, representing both the various workers (members) and employers who pay the bulk of the contributions.
It may be because the large firms of professional trustees who have so taken over when it comes to “new trustees” of DB schemes, were not represented among the trustees.
But whatever the reason, many of the panel discussions touched upon the “fiduciary responsibility” and questioned whether fiduciary duty was now more conflicted by the absence of trustees nominated by members (in the private sector). It became clear that the trustees who were of the “old school” believing their role was to stand between the member and employer, were not comfortable about the takeover of “house views” from a small number of trustee companies. These were several times referred to as causing “conflicts of interest”.
Professional have hit upon the headline of the report which you can download here
Or read here
In case the reader is intimidated by this takeover of professionals , they should know that LCP’s glowing assessment of the situation is endorsed by all the professional, legislative and regulatory bodies
This year we are pleased to have 18 PT firms participating in our survey – our largest number yet – alongside perspectives from The Pensions Regulator (TPR), the Association of Professional Pension Trustees (APPT), the Association of Member Nominated Trustees (AMNT) and the Department for Work and Pensions (DWP).
Bringing together these insights into our Sole Mates 2025 report, which highlights how trusteeship is entering “A Whole New World” of steady growth, sharper regulation and stronger governance.
The vestiges of amateur incompetence and even sharp practice are being replaced by this “whole new world”. But let us find out who the winners are! This is hinted at by Professional Pensions but not stated,
The report is quite meaty and the best read is at the end but I know you want to know who are the winners so let me release you with the killer charts , here and now.
Less than half of UK DB and DC schemes are without a professional trustee and this figure is probably distorted away from professional trustees by small schemes and derelict schemes unable to appoint professional trustees or unwilling for budgetary reasons. Many will head for the PPF if backed by a weak covenant and DB and consolidation if they read anything about pensions or talk to TPR. Where there are meaningful conversations between employer and trustees about the “end-game” , expect to see a professional trustee at the centre of it.
You have to go deep into the report to see where the action is happening and none of the firms who chose to be in the survey declared a loss in numbers, most continued to grow at a less frantic rate than 2024 but it’s interesting to see who has the investment in them to spurt and the answer is most!
When it comes to beauty parades, Dalriada, ICG, Vidett and Capital Cranfield are the winners with over 50% of the wins of the 17 companies going to them. This is nice for the marketing departments but doesn’t tell us who boss professional pensions, that comes from the next chart.
Of those 50% + of schemes using professional trustees nearly 80% are with Law Deb. , ICG, Capital Cranfield and BESTrustees. These are the firms with a history in the game though there are other aggressively growing behind them/
This is not the time to go into detail about all the firms in question, that is a job for further surveys but these professional firms are increasingly operating with firm house views, they are talked of as having a bias and winning mandates to suit particular requirements, most usually around the “end-game”.
It would be wrong to throw stones. But I suspect that the ownership of these firms is no longer the traditional partnership but instead private equity and the management of these firms is fixed firmly in risk reduction. It is unfair of me to say that individual trustees are acting on tight leashes, but they are not coming at the business of trusteeship with open minds, they have pitched their position on pensions
I suspect that the strength of professional trustees, especially those offering sole trustee corporate trusteeship is nothing if not determined – and determined by the firm they represent. This year LCP include among schemes with a corporate trustees with schemes with multiple corporate trustees. There is development!
The conference I was at was for another kind of trustee and LGPS Councillor and it was refreshing to remember it still exists, it is possible to forget!
DB Pension Scheme trustees must surely have a fiduciary duty to the scheme sponsor, after all it is the sponsor’s assets entrusted to them to pay the pensions of past, present and future employees. “End Game” planning effectively assumes the assets are only for the benefit of past employees at the expense of current and future employees and the growth prospects of the employer.
An English High Court case – Keymed (Medical and Industrial Equipment) Ltd v Hillman and another [2019] EWHC 485 (Ch) – would seem to suggest not, PO.
I disagree that this case is relevant. The Court found that in the circumstances at issue the defendants as trustees did not owe a duty of care to the company as the company had appropriately authorised the amendment to the benefits. The Trustees had therefore administered/invested the scheme appropriately for the benefits accruing under the Deed.
Legal firm briefings eg this one by Sackers
http://www.sackers.com/pension/keymed-limited-vs-hillman-and-woodford-high-court-march-2019/
would seem to disagree.
Trustees’ fiduciary duties
“In particular, the High Court held that no fiduciary duty is owed by trustees to a sponsoring employer, giving the following reasons:
the duty of a trustee to act in the beneficiaries’ best interests cannot be separated from the proper purpose of the trust itself (Asplin J in Merchant Navy: ‘to define the trustee’s obligation in terms of acting in the best interests of the beneficiaries is to do nothing more than formulate in different words a trustee’s obligation to promote the purpose for which the trust was created’).
“The judgment gives an example from the scheme rules: the trustees, after obtaining actuarial advice, determine the necessary employer contributions.
“The judge stated that it is clear that the trustees’ obligation is to ensure that employer contributions are at the level necessary to provide the benefits under the scheme.
“Employers’ interests may be relevant when considering this duty – as the trustees ‘would very likely be concerned not to prejudice the strength’ of an employer’s covenant by imposing overstretching payment obligations.
“However, the trustees ‘would actually only be balancing different and competing interests of the Members of the Scheme’
“a divided trustee loyalty – owing duties to both the beneficiaries and employer – is ‘profoundly undesirable’.
“A fiduciary should serve only one master (North & South Trust Co v Berkley)
when there is no clear or compelling reason to do so, the law will not create a conflict of interest fundamental to the manner in which the trustee of a scheme carries out his or her duties.
“Such conflicts may arise, but the law should certainly not go out of its way to create them
“trustees can declare conflicts of interest that arise. However, “it is difficult to see how a trustee could sensibly explain his divided duty to the other trustees and to the company: the trustee would be hamstrung between having to explain to each why the other was being done-down”.
Marcus Smith J [in the Keymed case] did recognise that, provided the trustees have regard to their primary purpose, and do not subordinate it to other interests, they are entitled to have regard to the employer’s interests, even if the protecting of these interests is a matter of indifference to the beneficiaries of the scheme.
“However, if the employer’s interests conflict with those of the beneficiaries, the employer’s interests should be subordinate to those of the beneficiaries of the trust.
“A decision to consider an employer’s interests (as may be proper for the trustees to do) does not create a fiduciary duty to the employer.”
I think the lawyers are saying it’s OK for trustees to consider and have regard for an employer’s interest, but there is no fiduciary duty beyond that.
We may be splitting hairs here?
Not a bit of it – Byron. Thank you!