Why use a professional pension trustee?
There are clear times at which an occupational pension scheme or sponsoring employer should consider appointing an independent trustee.
They include when:
- there's a gap in your pension trustee board’s knowledge or experience - particular expertise may be needed in, for example, pension investment, buy-outs, pension scheme governance, scheme wind up etc
- additional support is needed to deal with legislative or regulatory requirements, such as creating and maintaining an integrated funding and risk management plan
- demonstrating you have independent expertise on your trustee board would be beneficial - for example for effective 21st century trusteeship
Alternatively, you may find yourself in one of these five common situations that have led clients to appoint an independent trustee from PSGS:
- Conflicts of interest – often an issue for employer-nominated pension trustees during pension scheme funding and recovery plan negotiations, or during a corporate deal that might impact the strength of the employer covenant.
- Fundamental change to pension scheme benefits - for example when the sponsor wants to close a pension scheme to future accrual, as it is important the company does not have undue influence on the pension trustees’ decisions.
- Poor adviser performance - when the scheme sponsor or pension trustees feel they are not receiving the best service or advice, or when your pension scheme costs appear to be spiraling out of control.
- At or following a formal actuarial valuation - when a pension investment review is about to start, familiarity with asset and liability studies and knowledge of the wide range of investment options available to pension schemes becomes crucial.
- Insufficient time – for many pension schemes, especially those closed to future accrual, existing trustees often simply don’t have enough time or the motivation to deal with the legacy arrangement. Appointing PSGS as sole trustee removes the burden and responsibility for managing the pension scheme from them.
Case study
Our client: a leading charity
Objectives:
- to manage the legal issues associated with closing the DB (defined benefit) scheme to future accrual
- change investment strategy to reduce volatility and better match insurer portfolios
- represent members’ interests and keep them informed
Solution:
When the pension scheme sponsor informed us they wanted to close the DB scheme to future accrual, we sought legal advice on whether there was a ‘Courage Case’ problem with the scheme’s amendment power. This was an important issue for our members because it would decide whether the scheme’s link to final salary could be broken when it closed to future accrual.
Next, we started negotiating with the sponsoring employer about members’ future benefits. We also ensured all communications sent to our members were clear, accurate and helpful.
At the end of the consultation period, we ensured time was allocated to consider members’ comments and make any necessary amendments to the final proposal.
If you would like to talk through how we can help with your pension scheme, please contact us.
