Pension trustee skills, capability and culture: a call for evidence

The Department for Work and Pensions (DWP) and the HM Treasury (HMT) have launched a joint call for evidence in relation to „pension trustee skills, capability and culture“. The call for evidence is aimed at gathering information to inform potential policy making in several key areas of pension fund trust management with the ultimate goal to improve the outcomes for pension savers. The areas of focus for evidence are
(1) Trustee skills and capability: In this context, the DWP and the HMT would like to know and receive information on the following, among others:
– trustees‘ know-how about the standards of knowledge and understanding they are expected to meet in accordance with the Pensions Act 2004 (e.g. knowing and understanding basic laws relating to pension funds and trusts, the funding of occupational schemes, investments of scheme assets, etc.);
– their level of compliance with the standards;
– trustees‘ investment know-how;
– measures the government may take to improve the capability of trustees in beforementioned areas;
– the benefits of a possible public register of pension fund trustees;
– the adequacy of the current accreditation framework to ensure that trustees are well equipped to perform their functions;
– the appropriateness of the current standards for „professional trustees“ and whether or not any enhancements are needed.
(2) The role of advice: As many trustees utilize advisors in their investment strategies and management, the DWP and the HMT would like to find out, among others,
– how trustees utilize advisors to assess and manage risk in formulating and executing investment strategies, specifically focusing on the impact of such advice on decisions related to investing in unlisted equities;
– what (other) factors trustees apply when making investment decisions for the scheme;
– whether or not trustees use „investment consultants“ which are typically responsible for the provision of advice „in relation to strategic asset allocation, the selection of investment managers, and fiduciary management“ particularly in view of the fact that currently, „investment consultants“ are NOT under the regulatory perimeter of the Financial Conduct Authority (FCA); and
– how trustees assess the professional quality of such „investment consultants“ (skills, quality of advice, etc.).
(3) Barriers to trustee effectiveness, including duties: In this final area, the two regulators seek to find out issues that may hinder trustees from achieving best outcomes for scheme members. Specifically, the HMT and the DWP seek to know
– whether or not the concept of „fiduciary duty“ – which implies acting in the best interest of scheme members – is well known and understood by trustees;
– „whether the current framework and guidance on fiduciary duty is sufficient to help trustees make decisions in the best long-term interest of savers“;
– how to best balance long-term interests of scheme members with investment return issues, costs and charges, and services provided or used by a scheme;
– whether there are any issues faced by trustees as regards investment in illiquid assets; and
– whether or not trustees feel they have sufficient time to fulfill fiduciary duties.