A Pensions Mutual which will launch a CDC Pension within a year

Posted on March 8, 2026 by henry tapper

It is good to launch a good news story and I can today. Last Monday, while talking “small pots” we got news from the FCA that the Pensions Mutual had been registered and sealed

 

What is the Pensions Mutual?

We have registered this society for employers who want to participate in a CDC scheme for which Pensions Mutual Limited will be the proprietor. As proprietor it will make sure that members introduced by the employers will have workplace pensions for the whole of lives. They will build up pensions when people work and pay a retirement income in later life.

The FCA explained the variety of Mutual we were after as like a dairy to which farmers bring milk. At the end of each year they will get a share of profits rebated to them for their co-operation. We see the management committee of Pensions Mutual as acting solely for members and their employers. This is in the long tradition of pensions and we hope that Pensions Mutual will be promoted by pension consultants and by trade unions together. We hope that large and small employers will want to participate and ultimately we want it to be owned by those who use it as well as those who fund it.

What is the CDC pension it intends to launch?

Last October the DWP launched in parliament that allows employers to participate in multi employer (UMES) CDC plans. Till then they could only set up a pension for themselves and only Royal Mail has done so.

We had been approached by employers who wanted to offer a better pension to their staff than they could using DC . They wanted to have  control of its delivery. The Pensions Mutual is the delivery mechanism and a better pension comes from the CDC pension that is delivered.

Details of the CDC pension are laid out in a simple way on our website

Press  to visit Pensions Mutual’s CDC Scheme

The Government launched this type of CDC as a way for any employer to improve the pensions it offers staff by up to 60%. Some , such as the PPI think it will be higher, others such as the LCP’s Sam Cobb argue lower and we say that the exact amount it improves will depend on what it’s measured against. But we think that it is better value for contributions if what people save for is a pension!

We share the view of Pensions UK and the Pensions Minister that we are saving for pensions and therefore a CDC should be an advancement which we hope is adopted in time by all DC saving schemes. We hope too that employers who would like to offer DB but can’t afford the risk of contributions going through the roof, will use  Pensions Mutual CDC scheme.

From discussions we have had with large employers and their unions we know there is a wish to progress pension provision. We know too that there are many smaller employers who have an aspiration to provide a pension with the VFM of a large one. We think that is a fundamental fairness that whether you work for an employer small or big, you are entitled to an equal pension , pound for pound contributed.

This does not of course , deny that our Pension Mutual may not build sections for certain employers who have strong beliefs or whose workforce are likely to have different retirements to the nation as a whole.

Fairness is critical and where “sharing” cannot be fair, we will consider sectionalising. But by “we” I do not mean a few cronies on an executive, I mean a management committee who guides Pensions Mutual.

We need to bring together young generations who can build the operations of the CDC to enjoy the best things of modern technology with old folk like me who have experience of pensions going back to the last century before the closure of much private sector pension accrual.

We need to tap into the great asset managers we have in Britain. We hear the Pensions Minister for active management to bring good governance and we would like Pensions Mutual to follow the successes that we have had and will have if we see through the principals of Mansion House. We strongly believe that pensions should encourage better management of our environment and society and we want our Pensions Mutual to appoint trustees of its pension scheme who understand good governances.

As we make appointments over the coming months, we hope you will see our commitment to doing the job well. We will by the end of July be in a position to approach the Pensions Regulator for authorisation. Within six months we hope to have not just a Pensions Mutual Society but a CDC scheme in place so employers can begin contributing for their staff.

There is nothing difficult about this for employers. They will simply have to comply with the auto-enrolment rules. There will be no demand to pay more than the basic amount.  We hope that many employers will choose to pay much more for the sake of staff’s welfare in older age.

If you would like to find out more or meet with us, you can make a request through the website. I will be in Edinburgh next week if you are too. I am having some drinks with some who have helped us get this on Monday night and if you are in the City on Monday night you can join us using this link.

Thanks for reading to the end.

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Richard Smith – you don’t need to live on daily valuations of your pots!

Posted on March 7, 2026 by henry tapper

Richard Smith, my heart goes out to you. You have created feeds into your measurement tool so that you get a daily update of your “pot” valuations. You are killing yourself with information. Take a step back and ask yourselves some questions. You are a middle aged man with a lengthy life expectancy and you’ve people who you may consider you responsibility (pension actuaries call them “liabilities”.

You cannot measure your capacity to support you and your loved ones through at least thirty years of life by measuring your DC worth like this…

There have been a few time in the 2020s when we have had falling pots (remember March 2020 when we went up to Edinburgh for an investment conference at a time of COVID (we didn’t know it till a few days later).

I remember at the time thinking that what was happening to my DC pots was as awful as what was happening in the country. But the falls were only a representation of people’s uncertainty and over time, the uncertainty dissipated, the markets came back and now – six years on, we hardly think of those times and of the market fall.

It is not possible to predict the future and our futures should not be exposed to short term downturns, any more than we should feel happy because the market is up. We should be in pension schemes that pay us pensions.

This means taking a long-term view and not a daily view of our pension wealth!

So – my dear friend, I ask you not to worry about your pot values and get on with the many wonderful things you do , to help us plan ahead , considering our pensions on a dashboard!

Unless you are looking to take cash out , the value of your pot- day to day – is of little importance!  The spurious system of DC saving that we have today will be surpassed by a return to a system of pensions before too long and your pot value will cease to dominate you as it clearly does today!

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Capital doesn’t respond to slogans – it responds to incentives (Dan Mikulskis)

Posted on March 7, 2026 by henry tapper

Dan Mikulskis at People’s Partnership

If you’re travelling to Edinburgh for the Pensions UK conference should read this . First published in IPE, it’s conclusion is simple and one that we can all sign up to

Capital doesn’t respond to slogans – it responds to incentives

Should pension funds invest more in the UK? It’s a question that resurfaces regularly, often surrounded by fuzzy reasoning and calls for quasi-patriotism in capital allocation. And managers also have incentives to sell product.

However, beneath all that sits a more grounded reality when viewed from a neutral asset owner perspective looking out for members’ interests: capital doesn’t respond to slogans – it responds to incentives. And so, if we’re going to answer the home‑country‑bias question properly, we must unpack those incentives and understand where they genuinely support a higher UK allocation, and where they simply don’t.

For decades, investment theory has offered a clear starting point. Market efficiency holds that listed asset prices reflect available information: expectations for future revenues and earnings are priced in. The Capital Asset Pricing Model (CAPM) extends this, arguing that the optimal portfolio for a risk-seeking, long-term investor holds assets in proportion to their share of the global market. Global market cap weights have therefore become the baseline for strategic asset allocation.

The greater US weighting implied by this has broadly worked well over the last 20 years for asset owners. But theory abstracts away from features of the real world that do matter deeply to asset owners; there’s more to the answer than theory alone.

Setting aside shorter-term valuation views, what are the strategic reasons an asset owner might structurally allocate more to their domestic market than global weights suggest?

Broadly, five incentives push toward a home bias, while two forces push firmly against it. Understanding these seven factors helps explain why the right level of UK exposure varies across asset classes.

The incentives

1. Lower resource and access costs
Domestic investing is easier. It typically requires fewer specialist teams, intermediaries, and operational layers. Legal frameworks are familiar; oversight is simpler; fees are often lower. Global diversification, by contrast, demands larger teams, greater governance bandwidth, and more complex operations – all of which add cost over time.

2. Currency considerations
Most asset owners don’t want full foreign exchange exposure, nor fully hedged positions. Instead, they aim for a middle ground. But managing currency adds costs: overlay fees, forward point rolldown, and cash requirements to support FX hedging programs. These frictions are not enormous, but they matter. Domestic assets eliminate them – an advantage that grows as geopolitical uncertainty rises.

3. Inflation and liability alignment
Investors usually set return objectives relative to domestic inflation or local interest rates, not global equivalents. While the link between domestic assets and domestic inflation can be indirect, it is meaningful in areas like infrastructure, property, and some fixed income markets. This alignment doesn’t guarantee outperformance, but it strengthens the intuitive connection between assets and long-term objectives.

4. Tax treatment
In some jurisdictions (though not currently the UK), domestic investment enjoys favourable tax treatment. When present, this can strongly tilt capital toward the home market. Where absent, such as the UK, where stamp duty actually adds friction, the argument disappears.

5. Governance advantages
Proximity can matter. Domestic investing may offer real or perceived advantages in control, regulatory insight, and access to policymakers or local partners. Over long horizons, these soft advantages can support better risk management or even stronger returns.

The disincentives

  1. Diversification limits
    This is the most powerful counterweight. Many domestic markets are simply too concentrated to anchor a diversified portfolio. The UK equity market is a textbook example: heavy in energy and healthcare, light in technology and growth sectors. A large overweight to such a narrow market increases uncompensated risk.

  2. Liquidity constraints
    For large asset owners, domestic markets – outside the US – can become restrictive. Trading capacity, issuance volumes, and market depth matter when deploying tens of billions.

In equities and credit especially the UK market is not big enough to absorb very high allocations without compromising portfolio flexibility. Our own experience as a £40bn+ asset owner confirms that liquidity issues arise routinely outside the US, even in normal rebalancing.

How this plays out across asset classes

Listed equities
The case for home bias has weakened. Currency hedging is cheap; global vehicles are accessible; and the UK market’s narrow sector mix limits alignment with domestic inflation.

Large UK firms earn most revenues abroad, further diluting the link. With limited upside and notable concentration and liquidity risks, global benchmarks remain the sound foundation.

Fixed income
Sterling yields helpfully embed domestic inflation expectations and monetary policy (but also amplify exposure to local fiscal instability). The sterling credit market is concentrated in financials, and liquidity can thin quickly at scale. A modest home bias can be justified, but not an overwhelmingly domestic stance.

Private markets
Domestic private assets can be cheaper to access, foreign hedging is costly, and UK inflation can be more directly reflected in returns, particularly in infrastructure, property, and real assets. Yet capacity constraints and sector concentration emerge quickly. The UK opportunity set is material but finite, making a balanced blend of domestic and global exposures the prudent choice.

Stepping back
A clear pattern emerges: Real assets and fixed income often support some level of UK anchoring. Listed equities are better allocated globally.

None of this relies on patriotic appeals or political narratives. It reflects a simple truth: capital responds to incentives, structures, and constraints – not slogans.

How could these incentives be shifted if more investment into the UK was an aim?

Tax benefits such as stamp duty and Australian-style tax credits could clearly be looked at. Other incentives are harder to move quickly, but things like liquidity, access costs and diversification can be addressed through the considered actions of other pools of capital (e.g. National Wealth Fund).

Structural developments that facilitate better pooling of capital could improve market depth and scale helps fee terms and access over time. Genuine domestic investor influence on regulation and policy in real assets could tip the balance.

Taken together, this leaves a simple conclusion: the right level of UK exposure is the one the incentives themselves justify. In some areas, those incentives point toward a domestic anchor; in others, global diversification remains essential.

The task, then, is less about urging investors homeward and more about shaping the conditions that make home a sensible place for capital to reside. If the UK wants greater participation from long‑term asset owners, improving those structural conditions will achieve far more than just rhetoric.

Align the incentives and the results will follow.

Dan Mikulskis is chief investment officer of People’s Partnership, provider of People’s Pension

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Harry Scoffin’s efforts for leaseholders in parliament

Posted on March 7, 2026 by henry tapper

Harry Scoffin is not speaking for himself, he’s speaking for his generation and all generations trapped in leasehold flats they cannot afford to keep or sell.

His latest appearance was in Westminster where his fervour ignited Cove and Rayner later in the session. There has rarely been a performance in a select committee like his. He has produced an edited highlights for us and we should watch it this weekend/

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The nightmare of VFM for commercial DC schemes

Posted on March 7, 2026 by henry tapper

 

Katie smith speaks for Aegon when she calls for a 2 year trial period before VFM bites. She calls it a “trial period” and it’s an attempt to kill VFM before it kills providers.

Here she is in Corporate Adviser

Aegon UK has called for a two year trial period for the government’s upcoming Value For Money pension scheme framework, arguing that the “fiendishly complex” concept could not be widely adopted without full testing.

Aegon made the statements during an ongoing consultation period overseen by the Financial Conduct Authority on the framework. The latest consultation closes on March 8, and looks to address areas such as the introduction of forward-looking metrics to be considered alongside backward-looking metrics in assessments, and a four-point rating system rather than three, to allow identification of top performing pension funds.

Aegon claimed there is ongoing uncertainty over implications of forward-looking investment metrics, and that a feasibility study was needed around the new market comparator proposal, with Aegon calling for a two-year trial period of the framework.

This would mean that the public (aka the press) would not have acess to information till the next decade

Kate Smith, head of pensions at Aegon UK, said: “We support the aim of ensuring all workplace members are in a scheme offering value for money judged across investment performance, costs and charges, and quality of services. But coming up with an objective framework that covers all components of VFM across a diverse pension landscape is proving fiendishly complex.

It is of course a feature of VFM as most people understand it , that it is easy for someone to understand,

In the latest consultation, the regulators introduce several fundamental changes. These include a completely new market comparator database, the addition of forward-looking investment metrics, and a worrying downgrading on quality of member services and engagement aspects.”

Aegon argued for the proposed trial to be limited to the largest multi-employer default arrangements and the largest single employer trust-based schemes, with the data shared only with the regulators. It could then be launched fully and publicly from 2030, coinciding with the deadline for main scale default funds or mega funds to reach £25bn.

I have sympathy with the commercial providers. The time taken to report on VFM could make them uncommercial and could reduce their capacity to provide their clients with value for their money.

But what an opportunity they’ve missed. In the case of Aegon, AgeWage has run a VFM score for a GPP it runs for several years. We would be happy to let Aegon share the reports we provide to its employer and the members of the scheme. It is effective, cheap to run and it runs using a scoring system that is driven by the internal rates of return earned by each individual saver.

I do not think it is either expensive or hard to get the data to score individual performance nor to aggregate the individual IRRs against an individually marked benchmark score. It has been done millions of time and the only reason it isn’t in common use since it’s introduction in 2019 is the failure of the commercial providers to adopt it.

Katie Smith and Antonia Balaam

So while I am sorry for Aegon’s current predicament, I cannot say I’m surprised. The chance for it (and other commercial providers) to adopt a simple system endorsed by many experts  means they are now left with something that is neither easy or effective.

There is time to go back and revisit the AgeWage system, but I have other things to bother myself with when it comes to VFM. Measuring accumulation of savings is fine if all you are interested in is what happens to retirement , but we are past that now. Now we have many members past retirement trying to turn pot to pension or simply cashing out.

We have a CDC pension that the Government reckons will adopt up to 60% more pension. Is anyone really considering the performance of DC accumulation as a measure of VFM?

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Does a DC plan really need to be big to provide a pension?

Posted on March 6, 2026 by henry tapper

Millions of defined contribution (DC) savers now have access to in-scheme retirement options, signalling a shift from a savings system to a pension system, the latest data from The Pensions Regulator (TPR) reveals.

So says Jonathan Stapleton in Professional pensions

The watchdog said its analysis of decumulation products within defined contribution (DC) occupational pension schemes, published today (5 March), showed that some 13.4 million members were now offered drawdown at the point of retirement, a product not historically available within occupational schemes.

The analysis comes in advance of the introduction of guided retirement duty in the Pension Schemes Bill.

TPR said larger schemes were “leading the way” in supporting members when they come to retire – noting that some 86% of the largest schemes offer members at least one retirement income option.

In contrast, it said just 46% of small schemes offer members any decumulation product – and two fifths of all schemes offer members none at all.

TPR said the shift towards drawdown being offered in-scheme is largely driven by the growth of master trusts – schemes it said that have the scale and governance to make it a reality.

TPR director of policy Joey Patel said: “These findings herald a transformation in the DC workplace pensions landscape ahead of guided retirement duty, with millions of savers now able to access in-scheme retirement options. This is just the start, however.

“Too many members in smaller schemes are left without support when they reach retirement. This is not good enough.

“We urge trustees to start getting ready for the Pensions Schemes Bill by reviewing their offer and starting to design their decumulation products.”

Patel added:

“If you are not able to guide savers into the right retirement options for them, our message is clear: you should consider consolidation into a scheme that can offer value for money solutions.”

Torsten Bell said much the same thing at yesterday’s TUC conference. If there’s one point of the VFM initiative from FCA and TPR it is to make it so tough on DC pensions who fail to jump  the VFM bar that they have no choice to consolidate.

There is one exception to the “Size” game and that’s the UMES CDC scheme that is allowed to start small and big as if it were a new master trust.

We won’t see many new master trusts, but I hope for the sake of savers who want pensions, we get a few CDC schemes next year.

It is not expensive to run a payroll pension (any DB scheme will tell you that) but it is very hard to manage a fixed retirement income for as long as people need it, if you aren’t collective!

You have to be very big and friends with an insurer who pays annuities as you need them to. Rothesay have set the example with Nest and I hope that others will follow. Even so, it seems a tough way of going about it and I hope that as well as CDC “whole of life” schemes, we’ll see retirement CDC for those at that awkward moment when they choose to have their pot paid back to them.

The Pension Schemes Bill exempts CDC UMES schemes from the Size requirements that apply to multi-employer DC schemes.

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Admin & Data forum ; men strategize, women get it done

Posted on March 6, 2026 by henry tapper

As payroll is to “reward” so “administration” is to pensions, a name to file away a part of your operational world that doesn’t play much part in your strategy. That’s what I think corporate board and boards of trustees have done with payroll and admin respectively for as long as my memory lasts.

But yesterday , admin had its own conference at Convene which sits high above Bishopsgate in the City of London. No matter how much reputational damage administration has done to your brand, we all need administration and it was good to see Capita roughing it out through a bad time

 

Why was I attending this event?

There are two reasons.

The first to understand how pensions administration is coping with the arrival of artificial intelligence and what will be the need of administrators when administration may be outsourced to an artificial worker.

The second is to find out how advanced suppliers are to delivering the software and the service needed to run CDC scheme from 2027. I will not play shy here, this week and some friends registered a Mutual with the FCA to act as a proprietor and over the past few days and for a few months to come we will be procuring systems to deliver a new generation of DC that pays pensions rather than pots.

What did I learn?

Well I learned what I already knew but had not articulated, that women do the work and men do the selling (dressed up as strategy). That’s not quite right but there are large parts of this country (caring being another) where the hard work that men don’t want to do , is left to women- who generally get under paid.

But I learned that if you give a woman a platform and some scope to express her views, you get a really informative session and we got several, most spectacularly from Jo Causon who explained what the Insitute of Customer Service does. Why she and this institute were not central to the Government’s VFM debate, I don’t know.

What I didn’t learn!

I had lots of questions about AI and lots of questions about the perception of administration outside conferences like this one. Can AI agents have a conscience, can they learn discretion, can they manage bereavment?

I had questions that spilled over from Torsten Bell’s earlier session (coinciding with TPR’s here which I missed). The Pension Minister said there were two few good administrators, it was too hard to get to them and once you had found them it was nay on impossible to move data.

I’m not sure who and what  he was referring to, but it got a laugh at the TUC pensions conference.

Thanks to Professional Pensions

Thanks to the organisers and the sponsors and thanks to the administrators who helped me understand most things!

You can find the details here.

These events are massively important with pensions in flux from legislation and technological revolution. Few attendants  here will be in Edinburgh next week ;that is the Investment Conference, so I will carry a light for those I met anew or once again!

I learned a lot from the women who get things done!

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Help for our past 50 years work, hope for pensions next half century!

Posted on March 6, 2026 by henry tapper

John Hamilton

The Pensions Regulator has made an announcement of a change of attitude towards private DB pensions. Here is John Hamilton, chair of the Stagecoach Pension Trust, that has led change in the past six months.

My only comments here are that they focus on our past, on the savings we made in the fifty years+ prior to the closure of DB pensions earlier this century.

The spirit that wants to make the £1.2tr the DB pensions hold, invest in the UK needs also be applied to future saving.

Until recently DC had its own endgame with accumulation being the end of the savings game. That is changing, just as DB is changing. I would like to see the passion that we have from DB experts applied to the rest of this century!

We may not be able to return to private sector DB schemes (much as many I speak to still want to) but we can still pay pensions from DC, either through flex and fix drawdown defaults or better still – through collective DC plans that do everything that DB schemes do – but guarantee payments.

I am not quite sure where John Hamilton’s head is. Is he stuck in DB or has he an eye for what happens in the next 50 years (at least)?

I am looking to hear from the progressive DB trustees, managers and sponsors about what their plans are for the generations of staff who have no pensions, only pots!

 

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Spring statement from the Pensions Minister

Posted on March 6, 2026 by henry tapper

I was not able to go to the Trades Union Conference but I could watch it from afar and did, oddly from Bishopsgate where a separate conference was talking about pension administration. Torsten Bell talked of pension administration and I’ll come to that, I tried to ask his question to pension administrators but to no avail! In short no one’s being very grown up and it will be interesting to see Torsten Bell’s spring statement goes down in Edinburgh next week.

Economy First

The first half of Torsten’s pension statement was introduced as a reminder to union leaders that the pension and the economy are one and the same thing and that there isn’t much growth in our pensions (just as there hasn’t been much growth in the economy). The growth in pensions has come through because of pension credit’s increased take up and that is now  levelling off.

The economy is (according to Torsten) now at last moving in the right direction and that is good for pensions and pensions could be being good for the economy.  That is of course if the investment in Britain comes from LGPS and the private sector.

Pension Schemes second

As both a DWP and Treasury Minister, economy and pensions are co-joined in Bell’s speech. The economy can deliver more pensions .We did not hear about the state pension but we did hear about the Pensions Commission , due to widen the 55% of people of working age who save into a pension. With a union peer running  “PC2”, it is clear that it will be this Government’s legacy to later pension ministers , HMTs and DWPs.

But for now we have the Pension Schemes Bill and the CDC legislation to make for a pension rather than a saving system, There will be “bigger and fewer” pensions and the fractured LGPS is being brought together into a bigger pension with less pools.

Big Pensions can allow for active management of assets , active management being a sign of good governance. Small schemes can’t afford to actively invest. Those who think that VFM is the measure of good may want to erase these statements from their memory but this minister’s view of the future is quite opposite to the investment that has got DC accumulation to where it is today.

As we moved into contentious areas, Torsten was openly questioning what should be done. Surpluses were touched on , so administration which he saw as asking questions of how we manage bereavement and the at retirement decisions of all (but especially those with DC pots).

He pulled out a strange figure of “£29,000” as the potential improvement that could be achieved from better returns. Frankly, VFM does not seem of interest to this minister, in the sense that it is being sold to us by the FCA and TPR and if that number is what VFM means – I will need some convincing! His only compelling statement was that performance was now the employee’s issue (in DC/CDC) rather than the employers (in DB).

There followed some lines clearly fed him by the DWP and not as before from the Treasury

  1. We will see small pots sorted by 2030 (not much sign of Government help on that so far)
  2. We will see Pension Dashboards soon (no problems so far, but no promises of delivery to consumers either). As it takes six months from the Minister’s announcement , October 2026 as the earliest , needs an announcement very soon!
  3. Pensions will be pensions. Although he described pots as more “fungible” and therefore better for the wealthy, he  told us that over the past 15 years we’ve forgotten what a DC pension might be.

This led us into his expectation that whole of life CDC would be built this year for multiple employers and that retirement CDC would see legislation soon after the publication of the consultation.

I was not in the room to gauge the mood of the audience though I did get an invitation immediately after the event to the TUC pensions officer to speak on CDC in April, which suggests that the unions got the message that there is life beyond DC.

Bell’s departure from the hall was after the usual moans from frustrated advocates for pre-97 and WASPI rights and an unusually concise question from Bernard Casey on the Bill’s intention on mandation which Torsten Bell retorted

“It won’t be needed”

He emphasised that Mansion House was happening without mandation being used and a backstop is not needed when everyone is in agreement.

Bell is not showing any sign of turning down the volume. He was as full of himself and what he’s doing as ever. That’s what I want from a Minister and a Pensions Minister at that.

Like the Chancellor’s spring statement, Torsten Bell’s message was steady as he goes!

 

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TUC says all Trustee boards should have member representing trustees

Posted on March 5, 2026 by henry tapper

This blog is by Sandra Wolf of Mallowstreet

The pensions system largely functions well, some in the pensions industry have said in response to a governance consultation by the Department for Work and Pensions closing on Thursday but suggest extra rules around conflicts are needed. The Trades Union Congress meanwhile is calling for member representation on all trust-based schemes.

Responding to the consultation from mid-December, the Association of Consulting Actuaries said large schemes are effective but raised concerns about conflicts of interest in connection with defined benefit surpluses. Chair Stewart Grant Hastie warned about appointing connected firms and the employer’s power to appoint or replace a professional trustee.

 “The latter will become increasingly relevant when trustees have increased powers to distribute surplus to the employer,”

he said.

The ACA suggested a process for professional trustee or sole corporate trustee appointments that includes notifying the Pensions Regulator.

The pension schemes bill is set to allow surplus extraction from schemes if trustees agree, potentially allowing surplus extraction down to low dependency funding. The ACA’s concern is that sponsors could seek to put in place trustees that are more willing to release surplus. The incoming legislation means some companies with a DB scheme in surplus are becoming acquisition targets, while others are already looking at whether and how they can secure debt over pension surplus, suggesting some sponsors are keen to access pension buffers.

The Association of Professional Pension Trustees said accountability was central in trusteeship. Chair Rachel Croft added:

“While proportional regulation allows schemes to focus on substantive matters, regulatory demands can present challenges, especially for smaller schemes. We believe that the growing and now well-established professional trustee market continues to deliver substantial expertise and continuity, including facilitating improved strategic planning for complex transactions and long-term schemes.”

The APPT argues that potential conflicts for sole trustees are addressed with the Professional Corporate Sole Trustee code of practice, and is against restrictions on the number of appointments held by professional trustees, seeing monitoring, risk management and quality control as more effective than “fixed restrictions, which may inadvertently result in negative consequences”.  

It prefers strong principles and industry accreditation – with accreditation eventually becoming mandatory for professional trustees – to “arbitrary limitations or statutory regulation”.  

The Society of Pension Professionals agreed the current trusteeship framework is working well for the vast majority of members. It too is against limiting the number of trustee appointments or length of tenure, saying that “periodic independent governance reviews would provide a more effective safeguard”.

Jo Fellowes, who chairs the SPP’s Administration Committee, said:

“The UK’s trust-based pension system is fundamentally strong. The SPP believes that reform should build on what works, i.e. proportionate governance, professional expertise and clear accountability, rather than impose arbitrary restrictions.”

Among others, the SPP would instead like a

“clearer delineation between trustees and executive management, particularly in large master trusts and megafunds”.

 

The demise of MNTs may be a choice

As MNTs are not required to sit on trustee boards in a number of scheme and governance structures, the society is in favour of member advisory panels, surveys and impact assessments to ensure the member voice is heard.

The consultation itself admitted that

“with a more consolidated market there will inevitably be a move away from the traditional lay trustee board”.

However, MNTs are clear they do not see a move away from member representation on boards as ‘inevitable’. Member trustees are the only group with “skin in the game” in the decision making of the pension scheme and with no business interests in the process, said the Association of Member Nominated Trustees, warning this cannot be replicated in other ways. 

“They undoubtedly want what is best for members because it is best for them too,”

said Maggie Rodger and John Flynn, who co-chair the association.

They called for member representation across schemes to be mandatory, including on master trusts, megafunds and collective DC schemes. MNTs

“may be ‘lay’ to the pensions industry, but they often bring vital professional skills in areas such as HR, law and finance”,

they pointed out.

Trustee firm Independent Governance Group takes a different view, citing fiduciary duty. Louise Davey, trustee director and head of policy and external affairs at IGG, said:

“It is critical to remember that acting as the ‘voice of the member’ is not the solely preserved to lay trustees; acting in members’ interests is the duty of any trustee, and that includes effective communication and engagement.”

TUC recommends one-third member trustees on all boards 

The Trades Union Congress has now thrown its weight behind member representation across schemes, including multi-employer schemes. In a new report produced by policy researcher Daniela Silcock and published today, it recommends:

  • minimum requirements for member representation at scale by requiring all trustee boards of trust-based pension schemes to include at least one-third member representation, regardless of scheme size or structure;
  • encouraging governance structures that recognise the diversity of members in multi-employer schemes and are rooted in constituencies of workers based on characteristics such as the industry they work in; and
  • minimum standards for support, training and resourcing “to ensure that representation is effective rather than symbolic”.

General secretary Paul Nowak said:

“Pension schemes deliver better outcomes for members – and ultimately a better quality of life in retirement – when those members have a say in how they are run. As the government looks to move to a system of fewer, bigger pension schemes, ministers should look to Australia and Canada to see how member representation can help to ensure those bigger schemes deliver better results. All workers deserve to retire in dignity. It is vital that pensions are governed fairly”.

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