29 Jan 2021 - Estimated reading time: 5 minutes
"Change is the law of life and those who choose to look only to the past or present are certain to miss the future." (John F. Kennedy)
The pace and breadth of change within the world of pensions has been huge over the last 5 years, but what does the future hold? Our recent survey into the growth of sole trusteeship suggested significant growth in this area with an anticipated 35% of DB Trustee schemes with over £20m in assets moving to sole trusteeship in 5 years, increasing to 65% in 10 years.
It remains to be seen how this will play out against other areas of market development, such as consolidation, fiduciary management and Master Trusts. What is clear is that there is a desire for alternative models to the traditional trustee board approach, and sole trusteeship has been growing steadily over the last 5 years.
It is not a surprise that change is afoot, as our survey showed that the key drivers for a move to sole trusteeship include the lack of availability of MNTs, the increasing desire of companies to manage legacy schemes more actively, cost efficiency, and in some cases, the complexity of running DB schemes becoming too complex for lay trustees.
So, while sole trusteeship may have been seen to be a neat solution only useful for smaller schemes (our survey highlighted that 85% of current sole appointments were under £100m in asset size), this is likely to change in the future as these are issues which all schemes face.
The future for sole trusteeship
There are some potential challenges to sole trusteeship. Some of the responses to The Pensions Regulator’s consultation on the future of Trustee governance raised concerns about conflicts of interest, and the potential pressures on sole trustees to make life easier for sponsoring employers. Professional trusteeship brings benefits of experience and knowledge, but does a sole trustee model reduce challenge when there are inevitably fewer voices around the table? Whether perception or reality, in order to capture the benefits of sole trusteeship, these are points that need to be addressed.
Nonetheless, we expect sole trusteeship to make up a more significant proportion of the market, and The Pensions Regulator's response may well provide some tightening of governance standards.
This raises the question - how should this influence the way we, as advisers, engage with and support sole trustees?
The respondents to our survey expressed a desire for real-time consulting to allow nimble decision-making and timely implementation. This fits well with shorter but more regular and focused meetings, in contrast to a typical quarterly structure many are used to.
Proactivity has always been our game, and with the effective use of the online tools, streamlined reporting, and the recognised expertise and knowledge sole trusteeship brings, we believe it provides a platform to deliver value for money by focusing time and spend on what matters.
For further information please get in touch.
The growth of sole trusteeship
We chat to Marcus Hurd from ndapt on sole trusteeship. Recently in his experience, half of schemes are looking for professional trustees to eventually become a sole trustee. Why is sole trusteeship growing so rapidly at the moment, and is it only for small to mid-sized schemes? We discuss the benefits of the model to sponsors, and the new APPT code of practice. We also look at how the model will evolve in future.