New Pensions Regulator Consultation Asks: What is a Professional Trustee?

April 13, 2017 Jerod Zakson

It’s not a secret that as an actuary I know a bit about pensions. In fact, throughout the U.K. there are a lot of people who know a bit about pensions. There are CEOs, CFOs, HR directors, lawyers, accountants and pension scheme administrators who all offer a general understanding of pension schemes, and like me, are knowledgeable enough to lend a hand when expertise is needed.

“I have discovered over the years in pensions small things can often make a big difference.” Stuart Faloon, Conduent HR Services, Principal, Head of Settlement Consulting, U.K.

Many pension schemes are struggling, people have increasingly busy lives and the role of trustee may be a larger commitment than it was in the past. Similarly, to non-executive directors who deliver independent oversight to the governance of a company, it is a sign of the times that an “independent trustee” is often appointed to serve as a trustee of a pension scheme. As a result, trustees may now include a combination of current and former employees along with non-associated (or independent) individuals who may or may not be paid for their services. These people may be knowledgeable, and they may be paid, but are they professional trustees?

A new consultation from the Pensions Regulator has me reconsidering my willingness get involved next time someone is seeking trustee help with their pension scheme. In a consultation posted in March, the Pensions Regulator proposed some specific language around the definition of a professional trustee and a structure of penalties in the case of scheme governance and administration failings. For professional trustees, the penalties could hit £50,000!

The crux of the problem comes from the new consultation definition of a professional trustee.

From the Consultation:

We consider a professional trustee to include any person, whether or not incorporated, who:

  • acts as a trustee of a scheme in the course of the business of being a trustee
  • is an expert, or holds themselves out as an expert, in trustee matters generally.

This definition appears to go a long way towards defining a professional trustee.  However, in an environment where it is increasingly difficult to encourage individuals, whose knowledge and experience could benefit a trustee board, to serve as trustees, this definition could prove counterproductive if individuals who are “not in the business of being a trustee” are nevertheless caught within the definition of a professional trustee.

Generally Speaking

The consultation argues that the inclusion of the word “generally” should carve out trustees who hold themselves out as being an expert in trustee matters generally, rather than just in certain areas.

It is very beneficial to have professional people using their knowledge to “give something back” by serving on trustee boards.  However, I for one would not want to rely on how the word “generally” is interpreted in a court of law if I were to be asked to serve as a trustee of a pension scheme.  How would a court view me saying that, as an actuary who has worked with pension trustees for over 25 years, I should not be considered as an expert in trustee matters generally and therefore considered to be a professional trustee?

Or vs. And

The great concern over this revised description could boil down to the lack of a qualifier between the two criteria in the description. Missing is a clear message whether there is implicit intention that both statements in the Regulator’s definition should apply, implying an “and” between the two statements. Or, do the two statements stand independently and require an “or” to connect them?

Perhaps this may be a semantic difference, but I have discovered over the years in pensions small things can often make a big difference. The determination of whether there is an “and” or an “or” between the statements is the determination in the Regulator’s view whether or not I should be classified as a professional trustee. Without clarity, I am not prepared to be exposed to the risk of a potential penalty of £50,000 no matter how community spirited I might feel.

The full consultation is available here. What do you think?

 

 

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