Knowa, like a number of fiduciary supporting firms,  looks at pension trusteeship from the commercial perspective. This blog features a statement by Aled Davies, that gets to the commercial reality of being a pension trustee today and tomorrow.

There was a time when the business of trusteeship was secondary to the function of trustees which gave room to  something other than professional trustees. Trustees could be “lay” , some would say “amateurs”, member represented or employer promoted.

The new group of trustees need to be commercial to make a return on the firms they work for. These firms are largely funded by private equity and the business plans that have justified investment assume large shares in a shrinking market.

Behind the trustees is a separate business that supports the professional trustee. This is where firms like know (which Aled works for) deliver their value.

The business of trustee governance will step up several rungs. The delivery of pensions requires a business head.

The investment of the funds to pay members pensions drives the differentiator between a scheme delivering VFM and those who aren’t. Necessarily the delivery of outcomes will be how trustees and their schemes will be compared. But behind the scenes is a range of services that if not properly provided will be seen as a failure of the trustees.

Which puts the job of trustees at the centre of what DC and DB and CDC occupational pensions deliver. Here’s the reaction of Aled to what’s been delivered to trustees over the last week.

The cost of carrying out the work of trustees is broadly the same whether the money managed is £1m, £1bn or £100bn. But the drag on the returns from a fund to pay pensions is exponential.

We have considered the advantage of consolidation in terms of where a fund can be invested and how much it must pay in fees (relative to reward). However pension schemes, whether DC, DB and CDC are all offering comparable services, a guarantee of a pension even if that pension is not guaranteed.

The delivery of pensions has always been what DB trustees have been judged on. It will be what the collective CDC schemes will be judged on. There should be a value for money test for DB and CDC and it should stretch to DC pensions too.  The cost of delivering pensions will make trustees accountable for value.  The value for money spent on governance will be of interest not just to members but to the employers who choose multi-employer schemes .