They may be largely unpaid volunteers, but pension fund trustees are becoming increasingly more powerful figures. Trustees have played a key role in several recent corporate restructurings, as their position on scheme funding can be crucial in determining the success of take-overs or private equity buyouts. Despite this, relatively little is known about trustees and their views about their work.

To find out more about what trustees are thinking, Hymans Robertson, with the help of Engaged Investor magazine, carried out a major survey of trustee attitudes and views. The results, from 157 trustees, give an invaluable insight into the work of a small group of dedicated people who act on behalf of millions of pension scheme members.

We asked trustees to select the two most significant areas of challenge for them. Unsurprisingly, keeping up to date with legislation was seen as the biggest challenge for trustees (53% of respondents), while its complexity was the most likely issue to keep them awake at night.  These results suggest that government attempts to simplify pension legislation still have a considerable way to go and that trustees are still getting to grips with the new regulatory regime.

Governance, or the overall running of a scheme, and understanding investment were also seen as important challenges.  Contribution levels, communicating with scheme members and administration scored less highly.  This may reflect trustees’ beliefs that these areas of scheme operation are straightforward enough to run efficiently with little trustee intervention, but we suspect that it is more likely to be a result of the trustees’ only having time to focus their attention on the top-rated areas.

Trustee skills

In terms of their work, trustees see decision-making and communication skills as the most important attributes. At the same time, awareness of governance issues followed by knowledge of finance and investment were given as the strengths that trustees feel they possess for the role.  Trustees need to be able to decide on a course of action after discussing it among themselves and hearing the views of their advisers. The results reflect this, although some will be concerned that they do not have more financial and investment knowledge.

Is trusteeship unpopular?

One surprising finding was that, despite the problems they face and the need for considerable time commitment, almost three-quarters of trustees said they would recommend the role to others with similar experience and expertise and less than 10% would not recommend it.  Despite the negative press for pensions, and indeed trusteeship, the fact that so many trustees would recommend the job suggests things are not as black as sometimes painted.

There was also evidence that trustees don’t feel appreciated, as a little over half of those who expressed an opinion think they should be paid, with many saying this would recognise the vital work that they do.  It is interesting to see a majority of trustees, but not an overwhelming one, approving of payment for their work. The increasing amount of time for training may be causing this, along with a feeling that their work is often under-appreciated.

Member understanding

The survey highlighted a possible concern for employers, as most trustees think that scheme members don’t fully understand their pension scheme.  The average trustee thought that only 29% of their scheme members had a good understanding of the scheme.  This figure breaks down as 30% for defined benefit schemes, 39% for DC schemes, and, perhaps unsurprisingly, 20% for the more complex hybrid schemes. 

Time spent dealing with legislative and regulatory issues may be preventing trustees from spending more time on communications with members. 

Diversity

The survey found three significant groups for trustees’ career backgrounds; financial services (31%), administration (15%) and accountancy (13%). Other backgrounds, such as legal, teacher, media, IT, engineering and health professional had a low representation among respondents, of 5% or less.

Finally, the survey raises the question of whether trustee boards are sufficiently diverse, as it found that the typical trustee is likely to be a man aged 50 or over and living in London or the South East.  It is a concern that there is not more representation of women and younger age groups among trustees. The geographic bias to London and the South East could be a reflection of the fact that many company head offices are located in this region.

Paul Myners has, before now, queried whether pension schemes can operate efficiently with non-professional trustees.  Our survey identifies that these dedicated individuals are doing very well to address the issues that confront them, and that it is premature to write them off.

Asked to identify two features of their work that motivated them to be a trustee, 67% mentioned the protection of members’ interests, and 54% said that they wanted to ensure that the scheme is run effectively.  Fewer said that they were trustees because they found the work interesting, or because they enjoyed exercising the financial or investment knowledge.