Maggie Roger has written a sensible article that explains why member nominated trustees are essential to good governance.
Increasingly we are seeing professional trustees taking not just the lead role but the only role as trustees. The view that schemes are professional because of their exclusively offer trustees is indeed faulty. I fear too often it is part of what is wrongfully called “de-risking” and is a means of placing compliance as the principle function of trustees.
Maggie Rodger has been a strong advocate of CDC and has spared me time whenever I have met me to explain the work she has been doing with the Church of England CDC scheme. She takes the responsibility of trustees not to market the scheme they are involved in seriously, so this work does not appear in her article but I can say (not as a trustee) that her and the involvement of the Association of Member Trustees in the selection of trustees, says good things about the CoE CDC scheme to come.
Maggie looks back to Royal Mail
The introduction of member trustees brought an insight into wider member views as well as governance balance. Member-nominated trustees (MNTs) have given confidence to members that their scheme is being run in their interests.
This was demonstrated recently when the Royal Mail member trustees were instrumental in helping their members understand and accept collective defined contribution (CDC).
I will not be shy in saying that CDC can take a step forward from common practice today of DB schemes in wind-up and commercial DC master trusts. CDC scheme can and (I hope) will have representatives not just of employers but of members on extended boards. The Pensions Regulator calls for a minimum of three trustees on a CDC Trustee Board but I think there is space for more at the table.
I absolutely agree with Maggie Roger when she says
New pension models, such as CDC, will rely for their success on good governance to ensure generational fairness in the design, annual valuation and balancing decisions. Value for money proposals in defined contribution (DC) stop short at the non- numerical concepts of stewardship and service quality. Since these DC models place all the risk on members, either individually, or shared, surely they should be involved in governance of these issues?
The work of the AMNT has been taken up by the TUC in there recent paper and campaign for more representation for members
You can download this paper here.
It is worth reading alongside Maggie’s Professional Pensions article which you can access from here.
There is of course a place for the professional trustee and all trustees including member trustees should be qualified to do their job. But to suppose that trusteeship starts and ends with compliance with codes is to forget who pension schemes are working for!