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Case Studies

Updating investment governance approaches

This was an investment governance project for a FTSE100 client scheme with a collaborative approach to investment governance.

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Updating a collaborative model of investment governance 

The feedback we received showed that we were appointed partly because the client thought we had fully listened to their issues and to what they were seeking to achieve and demonstrated that in our suggested scope and approach. The client anticipated we would be more facilitative in helping them understand a range of models they could adopt, to then design the best tailored solution for their circumstances, rather than coming in with a likely solution already in mind.

The client’s existing ways of working were highly collaborative, with a joint investment governance group comprising Trustee directors, independent investment experts and senior Company representatives who in turn kept the overseas parent informed on strategy. This way of working however did not enable the rest of the Trustee Board to be as fully engaged with the investment strategy as ideally needed.

Our initial work was to understand the current model, beliefs and strategy, the journey and risk environment for the DB scheme, and what potential future arrangements and ‘no-no’s had been already been identified, and the reasoning behind these. This involved background work and well prepared interview discussion with all the main people involved. This enabled us to challenge thinking where needed and to consider alternatives at a high level.

The resulting findings and alternative models were then brought through to the investment group and then to the Trustee Board in the relevant levels of detail, where we worked with a lead Company representative and the Trustee Chair to help position the findings and supporting materials.

We were able to take the client through the range of models from self-managed (their existing model) to full fiduciary management, and the main ‘stops’ in between. We showed how the different models worked, the pro’s and con’s – complexity, regulatory (e.g. FCA, s.36 advice), cost drivers and implications for budgets, and the roles for the main stakeholders under each model: the Trustee board, the Company, the in-house investment team/resource, the pensions executive support team, an investment adviser, an external FM oversight consultant, the fund managers. In this way the client was able to see the differences and consider the realities of cost, regulatory aspects and transition, how much Trustee decision power to delegate, to whom and how to oversee this.

We also recommended ways to update the governance structure to more clearly define roles and protocols between the Trustee and Company, suggesting a Trustee investment committee be formalised with joint Trustee/Company membership and chaired by one of the independent investment experts.

The client adopted the new structure with an initial phased move to an advisory model, maintaining the option of transitioning further towards a form of fiduciary arrangement over time.

Trustee executive selection and board effectiveness review

We helped a complex multi-employer scheme to review and update their governance structure following a selection process to appoint a new Trustee Executive and Secretariat Service. 

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Improved governance and support for a complex scheme

This was a wide-ranging executive support and Trustee governance project for a complex multi-employer scheme, where the Trustee and the board had experienced challenging situations in recent years. It was time to move forward. The client formed a Working Group to liaise with us.

The client split the project into two separate tenders: a selection process to appoint a new Trustee Executive and Secretariat Service; a review of Trustee board and committee governance arrangements including board effectiveness. We later also advised on implementation of governance changes.

The Trustee Executive service selection work involved use of our extensive IP in this area and work to ensure that earlier difficult issues on conflicts management would not recur, with clear roles, protocols and behaviours. The new provider was in role for when the governance and board review got underway.

The wider governance and board effectiveness review was also very sensitive work involving a range of differing views, understanding and behaviours. There was a need to update and clarify roles, and to improve relationships, decision-making and ways of working. Some strong areas of governance needed replicating elsewhere in the structure, in updated committee arrangements and refreshing of skills. 

One of the powerful ways we used to help the trustees reach conclusions on these findings and recommendations was to plan and facilitate phased workshops with the trustee board, encouraging open discussion where all voices could be heard, to agree what was important, land some next steps, actions.

Outcomes of this work included board compositional change and a code of conduct, with clearer role profiles and an improved training plan. The skills and search process for the next Chair and a committee co-optee were agreed. A revised trustee remuneration policy was researched and implemented.

The committee structure was updated and a framework of responsibilities, delegations and reporting was drawn up, with revised terms of reference flowing from it, to enable nimbler decision making.

Getting from A to B: Investment Governance

We worked with two clients on similarly journeys with their investment governance. We helped them along their routes to different destinations.

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Different pension schemes – different destinations

Recently we supported two clients to change their investment advisory arrangements. Both shared a similar goal in wanting to discharge their fiduciary responsibilities as effectively as they could, but both had different ideas about how to achieve this.

These were two separate clients, two separate projects, however Muse was chosen to work with these trustees in both cases for the same reasons. Both clients knew we had strong technical investment insight, good practical experience of a wide range of schemes and governance arrangements and a thorough understanding of the type of advice available from firms in the marketplace.

We were also appointed because it was clear that we had no preconceived views as to the outcome of our work and that we would support the trustees to deliver a solution which was aligned to their requirements; it was fully understood that the decisions to be made were largely about governance.

Be prepared for the journey

During the project initiation phase our role is to make sure that the client is well prepared to reach their planned destination. We worked closely with the client to get to the know the scheme, its strategy and objectives, work done to date and current arrangements. In effect, we worked through a travel checklist to confirm the group was ready to start their investment journey.

Common items which can be ‘left behind’ in investment and funding planning include asset allocation focus, LDI, risk management and a lack of shared clarity of the ultimate journey objectives. These are topics which often elicit strong views and plenty of debate. It is not our role as governance advisers to dictate a fixed position in these areas, many of which are of course the remit of, and best managed by, your investment adviser. It is worthwhile to take time to check that the group has a common understanding and is signed up to work together towards a common goal. This initial work is done collaboratively: we facilitate challenging and constructive debate and settle on some guidelines which can be shared during the service tender.

The route

Success in the first steps for us means that the trustees can select the best investment advisor or fiduciary manager to deliver the requirements of their pension scheme and have a framework against which to measure success. This is best achieved when work has been done to document what exactly the trustee requires and the scheme specific circumstances and constraints. The selection exercise can then be targetted to these specific areas. Articulating your key investment beliefs and advice requirements puts you in a much better position to select a team of advisers who can meet these. It doesn’t mean that these requirements won’t change over time, but this is a journey you will take together from a strong starting point.

As we know, the market for firms providing investment advice is sizable. Trustees need to get into the detail of their requirements to make sure that they partner with the right firm and secure the best advice. We see schemes that run well under both traditional and fiduciary arrangements, or indeed a blend of both with advisers acting with a degree of delegation. What they have in common is that they can track that they are progressing effectively in the agreed direction.

For these two pensions scheme clients, we supported both clients in articulating a vision of how their investment arrangements would work most effectively during the medium to long term. This included what skills, capability, expertise and services they would require to get them where they wanted to go – from A to B. Albeit through very different approaches, one taking fiduciary management and one following the traditional advisory route.

Key learnings

  • Traditional investment advisory and fiduciary management appointments are valid solutions with a place in the market. It depends which is right for you.
  • Trustees should monitor whether the outcome of the CMA review provides clarity on how to navigate the investment advisory terrain and potential conflicts of interest.
  • It remains important that pension schemes get into gear and continue to be active in fulfilling their fiduciary responsibilities.
  • We encourage trustees to take time out to plan for their journey, even if there is no plan to review advisor or governance arrangements, make time for a session on investment objectives or investment beliefs during the scheme year ahead.

Choosing your Covenant Adviser

Our client found themselves needing to select a new Covenant Adviser but feeling unsure of how to go about it and unaware of what was on offer in the market.

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Conflicted advice

Our client’s covenant provider had just been appointed to provide advice to the sponsoring employer. The Trustee were not happy with the potential conflicts in this and decided it was time to change. The Trustee and the executive support team had limited knowledge of the market for covenant advice, and wanted someone to guide them through the process, make sure they were seeing the right advisers, asking the right questions and avoiding the sales and marketing that can so often obfuscate the realities of working with an adviser.

We were appointed because we can help our clients make a good decision, supported by a process that elicits the information they need to make that decision.

The selection begins

The first step was to help our client understand the market and the options available. We helped them obtain relevant information, not the standard marketing brochures that they received after direct approaches, and segmented the market for them. Broadly, there are the specialists, the consultancies and the large accounting firms. By providing our insights and knowledge of each, we helped the client select the shortlist of firms that represented the best likely match for them.

Through discussion about the market and the providers, we were also able to draw out the elements that were particularly important to the Trustee. This formed the basis of the selection criteria and requirements against which providers would be judged. In this instance, it was an understanding of regulated markets that would set them apart.

A request for proposal was issued, and the responses analysed. This is an area where clients find our input most valuable. We read the responses and provide a summary, which highlights the key strengths and weaknesses of the responses, but also brings our insights and perspectives from outside of the material that has been provided. For example, how does covenant advice fit within Integrated Risk Management.

Next, presentations were held. Surprisingly, the presentations were generally weak, perhaps the market is not used to presenting against the sort of brief that we provided. We want to make sure that our clients see their potential providers in a meeting scenario, so presentation briefings focus more on these attributes and aspects, rather than letting providers drive the agenda, accentuate the positive and gloss over the weaker areas. 

Decision time

Our process enabled the Trustee to determine the right provider for them, in terms of the services being provided, their understanding of the client and regulated markets, but, perhaps most importantly, the way they would work with the client.

The thinking and discussion that goes into the requirements, shortlisting and criteria mean that bidders have a much clearer idea of what is wanted from them, and the client receives responses that are geared to what they need.

Key learnings

  • Our market commentary provides some insight that clients find useful. We have a full understanding of what they do, and how it fits within Integrated Risk Management and regulatory requirements.
  • Putting the effort in at the start of the process, in defining requirements, considering the shortlist and the selection criteria, can reap rewards later in the process.
  • Issuing a presentation brief to providers helps to make the most of the time spent with them and avoid a glossy sales pitch.

Achieving Balance

There are many clients that have used a system of financial incentives to motivate administration only to find that it does the opposite. Our client wanted a more balanced approach to managing administration.

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Our client was experiencing some issues with their administrator. For justifiable reasons, the administrator was not hitting SLA targets and agreed performance targets. Volumes had spiked, there was significant project activity going on as well. The client was happy with the service, but the performance management framework in the contract was not balanced and was causing issues for the administrator and the client in managing it. The service credits were triggering whilst the overall service was good.

We were appointed to help our client review the performance management and develop a framework that brings more stability and balance to the relationship.

Regaining balance

Our starting point was that the objectives for the service need to be understood. Our client had a clear idea of what these are, but had not considered how these might feed into the management of the relationship. The administration needs to be delivering to the objectives and requirements and the only way to be certain that this is the case is to measure it.

Using the objectives the client had set for the relationship, we proposed a set of potential measures to form a balanced scorecard. A lot of balanced scorecards are not, in fact, all that balanced. They target specific areas of the service, but do not often represent the broad spectrum of activities and areas that are part of administration.

Part of our role was to challenge the way the client thought about managing their administration. We helped them to agree the four quadrants and overarching principles that would form their balanced scorecard and a set of measures, with clear definitions, against which to measure the administration.

Maintaining equilibrium

The service credits will no longer apply and our client now has a pragmatic, and balanced, framework that can help them to judge if the service is delivering what they want and need it to deliver. Importantly, the balanced scorecard is not set in stone. They can change and adapt as the service and relationship evolves.

From the administrator’s perspective, they are now being monitored in a way that accounts for the fluctuations of an administration service. Not only will they be monitoring traditional SLAs but there will be a regular discussion and metrics on key processes, technology, people, continuous improvement etc.

We helped our client put in place a firm footing from which to move forward with their administration partner.

 Key learnings

  • Balanced scorecards need to bring a broad range of measures together to achieve the “balance” they are designed to create. All too often, they are heavily focused on a particular aspect of delivery.
  • Administration requires objectives. It is not just about paying benefits, but how the scheme evolves, what that means for the administration and for the members and how the Trustee wants to approach the administration of the pension scheme. Objectives and performance measures need to be regularly reviewed to ensure they continue to reflect your priorities and the changing circumstances of the pension scheme.

Comfort and Reassurance

We were invited to join our client's Administration Committee to provide independent input and expertise on administration during a period of heavy workload for the administrator, the pensions team and the Committee.

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Administration Expert on a Trustee Committee

We were invited to join the Administration Committee of a large pension scheme as independent administration expert during a very busy period covering several projects and strategic decisions. We joined as a full member in the same way that you often find investment experts appointed to investment committee. We stepped down when the extremal input was no longer necessary.

 Our client was having an especially busy period with their administration and were confronting a lot of strategic and implementation issues. They recognised the need for someone independent, with an outside and fresh perspective, that could challenge their administrator, in house executive team and consultants, but just as importantly could support the Committee in discussing the decisions and challenges they were facing.

Adding value

Our membership of the Committee covered a tough period: a market review, de-risking and data issues were just some of the projects going on at the time. We brought our market perspectives and client experience to the table to challenge the thinking and decision making process. We helped the client hold the administrator to account and asked challenging, probing questions.

Comfort and reassurance

Our appointment provided reassurance and comfort to the Committee, Trustee and pensions team. It provided that extra level of oversight, challenge and brought a pragmatic and fresh perspective some of the tricky issues that they were facing. It pushed their advisers and providers to be more transparent and helped to foster a collaborative approach to the delivery of administration and complex, strategic projects.

Key learnings

  • Independent expertise can help to challenge thinking and ensure that you are asking the right questions of your administrator.
  • Market insights can bring new perspectives and ideas to the table that may not otherwise have been discussed.
  • An independent administration expert can help speed up decision making, foresee risks and also provide input and market insights on matters where the Company and Trustee may have differing views. 

The Importance of Oversight

In administration, it is the larger errors and systemic issues that are of greater concern, but can often be more difficult to see when the trustee is viewing the service from a distance. This is what was happening to our client. 

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Setting the scene

Administration is complex. It may seem simple to the member on the receiving end, and to the clients that hold it at arm’s length. But think about the raft of legislation, data issues, legacy rules, mergers, acquisitions and all the other things that get thrown into the pot for good measure. It’s easy to see how mistakes can creep in and errors be made regardless of how robust the systems, risk management and quality controls are that wrap around it.

So, in our view we tend to see minor errors as manageable and inevitable. However, it is the larger errors and systemic issues in an operation that are of greater concern, but can often be more difficult to see when the trustee is viewing the service from a distance, and assuming the administrator is on top of things.

This is what was happening to our client. They had a number of quality issues with their administrator and complaints were on the increase. We were appointed to take a more detailed look at the administration operation and get to grips with what was causing the problems.

Investigating the administration

We spoke with the client to build an understanding of the issues, and to get their perspectives. Most importantly, we asked about how they manage the relationship. We followed this up with a visit to the administrator to hear the other side of the story.

It is important in any relationship to accept that there are always two sides to any story. The administration operation was not set-up to deliver an effective and quality service, but neither had the client really got to grips with what was happening at the administrator. The trustee had never visited the office, never met the team and relied largely on the quarterly reporting. For all intents and purposes the administrator was left to their own devices, and unchallenged.

Our recommendation to the client was two-fold: firstly, spend some time with your administrator to think about what is wrong, why it is wrong and how to fix it. Then turn that into a plan and work together to transform the services. Secondly, take a moment to reflect as a trustee board on the role you play in the oversight of the administration and whether there are things you could be doing better.

Prevention better than cure

Casework errors and SLA delays should be reported as a matter of course in any decent stewardship report. But more fundamental issues in the service, such as resourcing issues or an incorrect or out of date knowledge base are much harder for a client to see. The administrator may not necessarily know either, and even where they do may be tempted to rely on the experience and knowledge of the individuals rather than distract them from BAU.

Oversight of your administrator is, therefore, important in ensuring the operation is effective and delivering a quality service. It also helps to build and foster constructive, collaborative relationships and ensures that both parties know what is going on, when and how it impacts the service.

Of course, there is a resource overhead in dedicating the appropriate amount of time to your administrator and many trustees may simply not have that available to them. This is where external support can play a part, and is something that our client looked into following our recommendations.

Key learnings

  • Administration is complex and errors are unavoidable, but there is more to a quality administration service than just right-first-time statistics and complaint volumes.
  • It is important to build a governance and oversight framework around the service. This needs to be pragmatic, appropriate and manageable based on your resourcing availability. External support can be deployed to help fill the gaps.
  • Fostering close relationships has softer benefits, such as collaboration, cooperation and a mutual understanding between each party.

DC Processes and SLAs

Understanding the different roles and responsibilities, ensuring appropriate SLAs are in place for all steps, and managing risks in the handover is crucial to ensuring effective administration and a positive member experience. 

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Setting the scene

Pension administration processes often involve a number of interactions between different parties.  Understanding the different roles and responsibilities, ensuring appropriate SLAs are in place for all steps, and managing risks in the hand over is crucial to ensuring effective administration and a positive member experience. It’s important that as technology evolves and the parties involved change, the processes are revisited to ensure they continue to meet Trustee requirements.

Our client was implementing a new DC platform provider. The existing DB administration remained in-house. The new provider had proposed their standard SLAs, and the client wanted to ensure they were fit for purpose and in-line with good practice. We were appointed to use our experience and expertise to assess the SLAs and DC processes.

How do you determine an appropriate SLA?

To understand whether the proposed SLAs were appropriate, we undertook a review of the new DC processes and the interfaces between payroll, finance and the in-house administrator to:

  • Ensure all activities were encapsulated within the SLA.
  • Assess whether are any risks were present in the processes, particularly in the exchanges between parties.
  • Understand how the activities completed by the platform provider sat within the whole end-to-end process, which is ultimately upon what the member experience is based.  

We met openly with the programme manager and business analysts responsible for developing the new processes to ensure we had a full understanding, and to identify any constraints.

We also reviewed the SLAs proposed by the platform provider against what we would expect to see based on our experience of the market and client projects. We undertook an analysis of the number of DC administration transactions the client could expect to perform in the subsequent years using historic client data to help test whether the SLAs felt appropriate.

We reported to the client on our findings and gave our reassurance on the effectiveness of the processes, highlighting key risks and providing guidance on the proposed SLAs.

We also provided the client with a detailed end-to-end DC SLA for the DC processes encapsulating steps performed by all parties, and enabling the client to truly understand and measure the member experience.

The results

With our support, the client was able to negotiate alterations and reach a level of comfort with the SLAs proposed by their new provider (not only that these were in line with market practice, but also that they were appropriate for the volumes of work expected to be undertaken).

By reviewing the DC processes, we were able to help our client put in place an end-to-end SLA, which covers each step in the process, including internal parties like payroll and HR. Our review has helped the client, platform provider and in-house administration team mitigate risk inherent in the processes and develop detailed work instructions, with clear demarcation of responsibilities between the parties.

Each party has now signed up to these SLAs and they are an effective tool for monitoring the efficiency of a process. However, it is equally important that the aim to hit an SLA target doesn’t sacrifice process and output quality. It is about striking the right balance between timeliness of a process, and the quality of the member experience.

Key learnings

  • Understanding the processes is critical to ensuring all activities are captured in provider SLAs and any risks are being appropriately managed by the provider before entering into a contractual arrangement.
  • End-to-end SLAs that belong to the provider can help the Trustee see through the full process and where each activity is undertaken.
  • SLAs help to monitor the effectiveness, efficiency and timeliness of a process. But they cannot measure quality. Putting in the wrong SLA, can damage quality service delivery, so the right balance needs to be struck.

Reviewing Full Services

After a long relationship with their provider, our client had decided it was time to consider their options. There were some cracks appearing, but they were not aware of what the market was offering: that's where we came in.

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Relationship trouble

Our client had been with their full services provider for over 15 years and enjoyed, on the whole, a good relationship. However, more recently some strains had started to appear and frustrations were building. The Trustee began to feel that they were not hearing the best thinking on investments and funding. They were concerned that fees were no longer competitive and that they were not an important client.

The problem our client faced was in knowing how to address these issues and what was available in the market after 15 years of development and change. That is why we were appointed: to bring the Trustee up to speed with the latest offerings and find a provider that would bring fresh views and work well with the trustee.

Broadening horizons

We facilitated a discussion on the service requirements, which helped the Trustee identify specific issues and focus on how they liked to work with their adviser, and how the relationship should work. We were able to challenge the existing ways of working and help them start afresh.

We then managed the selection process. We approached a broad range of firms to ensure the client saw the full spectrum of offerings in the market and options for their future relationship.

For us, selecting a new adviser is about the relationships between client and provider. Our role is to ensure that there are opportunities to build relationships, see what the provider would be like to work with and ensure that the Trustee are satisfied that a provider can meet their requirements. To do this, we held a series of calls with candidates and issued an RfP, we facilitated a decision based on that initial contact with providers and progressed on to presentations.

Presentation is a bit of a misnomer. It is important that the client and any potential provider work well together and have a similar culture. Therefore, our approach was to run a mock trustee meeting. We set a scenario agenda that covered the full range of services, allowing candidates to approach as they would at a real meeting.

It was interesting for the Trustees to see the range of approaches that were taken and to hear some, essentially, free advice! It gave a good feel for what the relationship would be like and how well the two parties would gel in practice.

A Brighter Future

The Trustees were surprised by what they saw: electronic governance software, asset-liability modellers and transactional member websites! The Trustees were not receiving any of these and had some eye-opening discussions with the providers on funding, investment and integrated risk management approaches.

The Trustee found themselves in a bit of a bind: two strong candidates and a split vote for the preferred candidate! From our point of view, this was fantastic news. It was great to know that we had found two providers that were such a good match as to make the decision impossible.

However, a decision was reached and a new provider was appointed.

Key learnings

  • It is important to regularly take stock of your relationship with advisers and ensure that you are seeing the best of what they can offer. This is particularly necessary where you are receiving full services, so do not have any readily available point of comparison.
  • The market is competitive, but the tools and technology are similar with advantages and disadvantages to each provider’s offering. The focus of a market review should be on relationships and working together, and not give undue weight to the flashy tools that providers might choose to emphasise. 
  • Having a clear set of requirements and an idea of your preferred ways of working can help inform the shortlist and the criteria by which a decision can ultimately be made.

Broadening Horizons

Our client appointed Muse to help them take stock of how far they had come from a previous governance and effectiveness review and to help them think about how far they still needed to go. 

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Troubled waters

Our client had been through some difficult times, both as a trustee board and as a sponsoring employer. They had, quite sensibly, decided to conduct a review of their scheme governance and trustee effectiveness.

However, the process they went through with a competitor of ours was challenging, dispiriting and produced a quite damning verdict. Nonetheless, the trustee had worked through the recommendations and were now ready to re-assess where they were. They wanted to take stock of how far they had come, but also think about where they were going.

The trustees were understandably reticent about another effectiveness exercise. The memories of the first were still relatively fresh. We were appointed because we were able to demonstrate an awareness of the sensitives inherent in any such exercise: the need to balance competing interests, understand different views and personalities, and to create an open, supportive and collaborative exchange of opinions and views.

Taking stock

There were two main parts to the review: to look back at the original findings and ensure the recommendations had been implemented, and to consider the future strategy and the tools the trustee would need to reach their goals.

Having got up to speed with a review of key documentation, we observed a number of trustee board and committee meetings. It is important to see the ways of working in practice, to understand the personalities and interactions in a meeting and to get a feel for the culture of the trustee. We also held a series of interviews with advisers, the pensions team and a sample of trustees.

This was followed by a survey created specifically for the client. This was an informative way to test self-perception. We had formed our views and could now test those against how the trustees saw themselves. In the end, they were quite a good match. The trustees were aware of their weaknesses, but we also helped them to see their strengths.

More interviews followed. We helped the trustees to take a step-back and think about the future. Where did they want to go and what did they need to get there? And what barriers were over the horizon?

Our findings were documented in a report with clear recommendations on how to proceed.

Moving forward

Our key recommendations were three-fold and were lessons that are applicable to many trustee boards. Increasingly, independent trustees are on boards and committees and they, understandably, bring a greater level of knowledge and experience.

This makes it important that the pace of meetings and discussions does not leave behind the lay trustees. Everyone needs to be comfortable with the decisions being made and the debates taking place.

This client had a high turnover of company trustees. This was an issue, and the sponsor has a culture of supporting their people and members, so were keen to ensure that trusteeship became seen as a step on the career ladder and a chance to learn transferable skills.

Finally, in order to meet the challenges over the horizon, the trustees needed to look at how they were structured. The Committee structure was not working as efficiently as it could, and we identified ways to improve how Committees manage work, and how the trustee board delegates.

There was plenty of food for thought for the trustees to take forward and we left them with a positive view of the progress they have made and their strengths, but an awareness of weaknesses to address as they move forward.

Key learnings

  • Effectiveness and governance reviews can be quite sensitive. It is important to consider the viewpoint of those being interviewed and to ensure that an open forum is available for people to put forward their views.
  • There is a tendency to accentuate the negatives, which can be demoralising. It is rare for a trustee board to be wholly ineffective, so it is important to think about the positives as well.
  • Governance reviews are not just about a point in time. This review looked at how far the trustees had come, where they were now and where they wanted to go next. A governance review offers the best value when it is done in the context of the past, present and future.

MNT Selection

We were appointed to help our client develop a pre-selection process for a single MNT vacancy on their trustee board. The candidates were always going to go to ballot, but the trustee wanted to be able to exercise some control over the skills and aptitudes of the candidates.

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MNT selection

We were appointed to help our client develop a pre-selection process for a single MNT vacancy on their trustee board. The candidates were always going to go to ballot, but the trustee wanted to be able to exercise some control over the skills and aptitudes of the candidates.

Our independence was a key part of this and helped to overcome any vested or personal views of the trustee, but so also was our ability and experience of running, compliant, proportionate, practical and suitable processes that help move the trustee to the right result.

Of course, by “right” we do not mean that there was a foregone conclusion, but that the best candidates, suited and able to contribute to the trustee board and bringing the right skills and experience went on to the ballot.

How to select?

Defining the process is critical, and this is where experience came to the fore. We developed a process that was built around the needs of the trustee board, and sought to fill the gaps in expertise and experience around the table. This is not just about finding, for example, an expert in LDI, but about balancing the specific gaps against the general competencies of being a trustee of a large scheme. It is all well and good having an encyclopaedic knowledge of a particular specialism, but if you cannot communicate that effectively then it is of limited use.

We helped to define the process, prepare the applications and structure the interviews with an agreed framework of questioning and scoring of candidates that would stand up to any external scrutiny or challenge, and satisfy the requirements of the Regulator.

Six applications were received and through a robust selection day, five were put forward to a member ballot.

Making the appointment

Elections can be tricky. Although the client had pre-selected five strong candidates that were keen and willing, the majority of them could not win. There was only one vacancy. This is a particular danger when incumbents stand for re-election and find themselves at the mercy of the membership. This can result in the loss of experience, knowledge and key skills, so it is important to ensure that the role profile and selection of candidates ensures individuals with balanced skills are on the ballot.

There is a question to be asked about the viability of election as a means to fill MNT vacancies, particularly as the focus increasingly shifts to the “professionalisation” of trusteeship more in line with what is expected of Corporate boards.  Whilst not the situation here, some MNT processes use a panel to make an appointment from the member nominated candidates.

Key learnings

  • Taking the time to think logically through the process, and the balance between actively looking for specific skills and the general requirements of trusteeship can help achieve a better outcome.   
  • The process needs to be robust enough to stand up to challenge, and meet requirements and this can be done through how you score and question the candidates. It is important to make sure this is documented clearly.
  • Elections do not always produce the desired or best outcome, so be clear about whether selection or election or a mixture of both is the right process for your scheme. 

Asking the Right Questions

We recently work with a client that was looking at the master trust market as one of their options for the DC arrangements. Our knowledge and experience of that market helped them to undertake a thorough review and reach a robust decision.

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Starting the search

Our client was reviewing their DC options, something that we increasingly see, and had decided to look at the master trust market. They wanted to reduce the costs and governance burden for the company, but ensure that members were getting good value for money. It was also important that the members could access the full flexibilities.

We were appointed because of our depth of knowledge of the master trust market and our lack of ties to any master trust provider. We led the client through a detailed selection exercise which asked some probing questions and looked at the depth of the master trust propositions, not just the face value.

Asking the right questions

The selection exercise followed a similar pattern to many others: an RfP, presentations and site visits. However, what marks this one out from many others that we have seen is the level of engagement from the client’s working group, which contained both trustee and sponsor representatives. The client asked lots of questions and with our support, undertook a lot of due diligence on their bidders. They genuinely wanted a detailed understanding of what a move to the master trust would mean for members.

There were a few surprises along the way: the client was not aware of all the detail that sits behind a master trust proposition and how the choices that members face will be different to what they had in the existing DC arrangement. There would be different lifestyling choices, different fund ranges, new ways to engage with the master trust and new tools to support decisions and education.

The client was not familiar with the market and it was our involvement that allowed them to ask searching questions of providers and test what each aspect meant for members.

Making the decision

We encouraged the client to think about the options and ask questions, not just of us and the bidders, but of themselves as well. Our independence allowed us to facilitate conversations with the master trusts. We often find that providers are more open with us because we have no axe to grind; we are not offering a master trust solution ourselves or competing with the providers in other areas.

The client saw behind the scenes and was able to understand that the value for members was not just in the AMC, but the overall proposition: the communications, the website, the fund range, and the at-retirement options.

They made their selection. They chose the provider that was able to demonstrate the true value of their overall proposition to members as well consistent performance. At the end of the process, we documented the exercise, the outcomes, the evidence and the decision. This is a useful tool to bring everything together and look back over a project.

Key learnings

  • Value is not just about cost. It can often be hard to define, but a thorough review and selection can help challenge providers to truly demonstrate the value in their proposition.
  • Asking lots of questions helps to get under the skin of a proposal and to challenge what is being presented to you.
  • Documenting the process and outcomes is a useful way of reviewing a project and the objectives it has delivered (if it has!). It is also a handy audit trail.

Outsourcing Investments

Our client had an in-house investment team and wanted to consider the options for providing these services going forward. Our role was to facilitate this decision and help the Trustee consider the best way forward.

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Deciding to outsource

Our client had an in-house investment team including provision of investment advice and some direct investment management and was on a journey towards a greater level of outsourcing. However, they didn’t know how they should approach the range of options for outsourcing, in pursuing their objective to further derisk the scheme.

They wanted independent expert advice on the outsourcing options available and on how they could get from their current approach to a new way of working. They knew it would be important not to lose aspects of governance and Trustee/Company engagement that were working well, so that all the main stakeholders could coalesce around an agreed way forward.

Our client recognised that outsourcing presented an opportunity to reconsider their requirements and governance approach: What was working well? Where did they need to improve? What challenges were they now facing? What were other schemes doing? How could each option help and which was best?

We were appointed to help facilitate this review. In approaching and conducting the review we did not lead the witness. Our client felt that we listened carefully to their views and did not approach the exercise with a rigid set of options and a foregone conclusion.

They told us our successful approach was founded on excellent interview, reporting and discussion skills, in our ability to make relevant challenge and bring in expert subject knowledge, and to help them reach practical conclusions that could be implemented at the required pace.

Considering the options

We interviewed key stakeholders from both the Company and Trustee and also the Scheme Actuary to make sure that we were getting rounded and representative views. This also gave us rounded insights into the future requirements, the priorities, and how each party experienced the current investment governance model. For example, a focus of the Company was to reduce the volatility of pension fund risk on its balance sheet.

As well as views on technical options and models, the interviews gave us insights into the investment governance and ways of working. Governance is as much about culture, personalities and behaviours, about how people work together, as it is about dry process. So, the interviews were a window into what worked well, what would need to be different in a future model, and what needed clarifying or fixing.

We think the main skill with interviews is creating a non-judgmental environment in which people with different experience and backgrounds are comfortable in being candid and open with their views and concerns. It takes thorough preparation, good inter-personal skills and a willingness to put ourselves into the client’s shoes. We were able to quickly build trust with individuals and have a positive conversation so that our findings and recommendations could be positioned realistically and presented on a ‘no surprises’ basis.

Making the decision

The focus of our review had been to consider the options available to our client following the decision to outsource their internal investment team. We considered this and what, in our view, the client would require from their investment model going forward. Our findings considered the range of options available, which we thought most suitable and why, and how they could over time move to the new basis, and possibly refine it further in future.

We presented out findings to the Trustee and included some observations on their governance: for example, the need for clarity on how strategic issues were being addressed and changes to the internal governance structure which would be beneficial.

The Trustee thought our report was honest and didn’t “pull any punches” – reflecting the benefit of our independence and our focus on the specific project objectives, not on future consulting opportunities.

Key learnings

  • It is important to genuinely listen and avoid entering a governance exercise with a foregone conclusion in mind;
  • The perspectives of all stakeholders are important to bring in with an independent mindset, in ways that respect but do not inadvertently promote historical positions;
  • Tough messages occasionally need to be delivered, but this can be done in a constructive way. External facilitation can help achieve this and reduce problematic attachments to particular positions;
  • Whilst the ultimate goal might be a fully outsourced model it is important not to over-reach on change management with the resources that may be currently available; consider how existing gaps might be filled and think about what intermediary steps might be needed to get there over time.

Governing Investments

We undertook a detailed review of the investment governance arrangements and trustee structure ranging from the status quo, sole trusteeship and the implications for governance of full fiduciary management.

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Change required

A company-appointed trustee felt that the trustees were rather too passive when it came to the investment strategy. This individual trustee felt the trustee board wasn’t considering all their options and weren’t making the best use of their investment adviser. However, being a company-appointed trustee meant that there was a risk of perceived conflict and he recognised that can be just as damaging as the real thing.

The company appointed trustee felt fairly sure that fiduciary management was the best option for the scheme and, therefore, decided to challenge the trustees to undertake a detailed review of their investment governance.

We were appointed to facilitate this review, not because we are investment advisers but because, as independent governance experts we can really get under the skin of how a trustee board operates.

Our role was to undertake a detailed review of the governance arrangements and trustee structure ranging from the status quo, sole trusteeship and the implications for governance of full fiduciary management.

Reviewing the trustees

Governance reviews are about many things, including personalities and perspectives. We ran a series of interviews with each of the trustees, the key advisers and the company. We managed to schedule these for the same day, which gave us the added advantage of being able to hear issues, ideas and perspectives which could be incorporated into later interviews. Obviously, confidentiality was protected, but presenting an alternate view is a useful way of engaging trustees in discussion and prompting examination of their role and effectiveness.

We also decided to interview the member nominated trustees as a group at the same time. We often find that this encourages more debate and discussion of the issues rather than individual interviews. It feels less confrontational and can result in much more open dialogue about the effectiveness of the trustee board.

We gathered together all the insights we had gleaned through the interviews, and compiled a comprehensive report setting out the options, pros and cons and a recommendation for the trustees.

Making the appointment

As it happens, we reached the same conclusion through our analysis as the individual trustee who had sparked the exercise into life. We concluded that fiduciary management presented the best option for this particular scheme. The trustees were not investment experts, and were not really taking heed of, nor challenging, advice from their incumbent adviser. The advice from the incumbent was also a bit lacklustre and we felt their approach to the client wasn’t optimal for the scheme. This was a scheme of the right size for fiduciary management, and we could see benefits to them from the delegated model.

Through open conversation the trustees have recognised their lack of effectiveness in investment governance, and the need to take the necessary steps to address it.

Key learnings

  • The potential for a conflict to arise, real or perceived, can prevent a trustee acting where they feel things could be improved. This is where external, independent facilitation can help identify the need for change.
  • Interviews are a good way to seek views and having group interviews can encourage an open sharing of views and debate between trustees.
  • There is a broad range of investment governance options to be considered, and this can make it a challenge knowing where to start. Think about what you want to achieve, and work from there.

Making the Selection

How can you be sure that you are getting the right fit for your trustee board and bringing the right skills to the table when selecting MNTs? We helped our client define their process for appointing Member Nominated Trustees.

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MNT selection

We were appointed to help our client develop a pre-selection process for a single MNT vacancy on their trustee board. The candidates were always going to go to ballot, but the trustee wanted to be able to exercise some control over the skills and aptitudes of the candidates.

Our independence was a key part of this case and helped to overcome any vested or personal views of the trustee, but also, so was our ability and experience of running, compliant, proportionate, practical and suitable processes that helped move the trustee to the right result.

Of course, by “right” we do not mean that there was a foregone conclusion, but that the best candidates, suited and able to contribute to the trustee board by bringing the right skills and experience went on to the ballot.

How to select?

Defining the process is critical, and this is where experience came to the fore. We developed a process that was built around the needs of the trustee board, and sought to fill the gaps in expertise and experience around the table. This is not just about finding, for example, an expert in LDI, but about balancing the specific gaps against the general competencies of being a trustee of a large scheme. It is all well and good having an encyclopaedic knowledge of a particular specialism, but if you cannot communicate that effectively then it is of limited use.

We helped to define the process, prepare the applications and structure the interviews with an agreed framework of questioning and scoring of candidates that would stand up to any external scrutiny or challenge, and satisfy the requirements of the Pensions Regulator.

Six applications were received and through a robust selection day, five were put forward to a member ballot.

Making the appointment

Elections can be tricky. Although the client had pre-selected five strong candidates that were keen and willing, the majority of them could not win. There was only one vacancy. This is a particular danger when incumbents stand for re-election and find themselves at the mercy of the membership. This can result in the loss of experience, knowledge and key skills, so it is important to ensure that the role profile and selection of candidates ensures individuals with balanced skills are included in the ballot.

There is a question to be asked about the viability of election as a means to fill MNT vacancies, particularly as the focus increasingly shifts to the “professionalisation” of trusteeship more in line with what is expected of Corporate boards. Whilst not the situation here, some MNT processes use a panel to make an appointment from the member nominated candidates.

Key learnings

  • Taking the time to think logically through the process, and the balance between actively looking for specific skills and the general requirements of trusteeship can help achieve a better outcome.
  • The process needs to be robust enough to stand up to challenge, and meet requirements and this can be done through how you score and question the candidates. It is important to make sure this is documented clearly.
  • Elections do not always produce the desired or best outcome, so be clear about whether selection or election or a mixture of both is the right process for your scheme.

Approaching Renegotiation

When you approach the end of your current contract, it should not just be rolled over into a new term. It is important to ensure the contract is reviewed and refreshed. Read how we helped our client secure a much better contract.

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Setting the scene

Although it’s not a document anyone wants to be constantly referring to, the contract between Trustees and their administrator is crucial in governing the relationship. It is important that as a renewal approaches it isn’t just rolled over. It needs to be looked at afresh to make sure it still reflects what the Trustees need from the service, and the services actually being delivered.

Our client was approaching their contract renewal, and had gone through significant changes since originally outsourcing. The service hadn’t evolved in line with the changes to the scheme, and therefore they had some issues with the service. The administrator was acknowledging these and taking steps to remedy them. The causes were understood, although it was still a drain on our client’s time.

Our client wanted to know how to get the best from their administrator, and how the current contract could be developed to better support service governance and the relationship. We were appointed to use our experience of administration contracts and the administration market to identify what had gone wrong and why, how it might be fixed and how the contract could better reflect the Trustees’ needs.

Understanding your services

The core focus of the project was to get the perspectives of both parties on the services past, present and future. What had gone wrong? Why? What needed to change?

We spoke with the client for their take on the requirements, and we met openly with the administrator to hear their side of the story. Relationships are not one-sided and there are often things that clients do that make the life of the administrator harder than necessary. We also reviewed the existing contract against what we would expect from a modern administration agreement and in the context of what the client wanted from the service.

Following a series of conversations and a review of background documents, we were able to put together our thoughts and recommendations. We were able to give our client our views on the administrator, our suggestions for developing the contract and ideas on how best to approach the renegotiation.

The results

Although the client wasn’t necessarily considering a market review, it was a potential outcome. Undertaking a formal review of the contract and services does add some competitive tension to discussions with the administrator, and provides the extra incentive to meet the client halfway on some key issues.

This review was never a matter of cost for the client, and rightly so. It was far more important that they secure contractual terms that drive the right behaviours in the administrator, and reflect the services as they are today and accommodates what they may be in the future.

Having said that, our client was able to secure a healthy fee reduction alongside a revised team structure, a refreshed senior team supporting the account and a sea of change in key contractual terms.

But this wasn’t purely about the paper. The review has also helped the client and the administrator take practical steps to better address the historic issues, supported by the right contractual terms. This has all led to an improvement in the relationship rather than continuing friction or expensive and time-consuming market reviews.

Key Learnings

  • Contract renewals are an opportunity to review the contract, but it is important that the focus is not just on securing fee reductions. The contract needs to work for both parties.
  • Giving careful consideration to the services you have received, and the services you want to receive can help identify areas that may need changing in the contract.
  • Engaging openly with your administrator, whilst maintaining an element of competitive tension should increase the chances of securing the changes you are seeking.

Selecting an Actuary

Our client felt it was time for a review of their two actuaries, and an important consideration was the potential upside and downside of sharing a single actuary across their two schemes. Read more to see how we helped.

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Setting the scene

Our client had two schemes, each with a different actuary. This wasn’t a problem, but it was time for a review and they wanted to consider the benefits and downside of sharing an actuary across the two schemes.

We were appointed to support the selection process. The client needed our knowledge of the market, and experience of managing tender exercises, to ensure they were seeing the most suitable candidates and running a robust process. The fact that we are completely independent from suppliers, and had no prior involvement with the schemes, meant that we would bring a fresh perspective to the process.

Finding what’s right

There isn’t any great secret to a selection process, so the key is how you focus on getting the right candidates, and finding the right cultural fit whilst meeting your service requirements. The shortlisting is critical in this, and a knowledge of the market really helps to identify a broad range of firms and consulting styles.

Our client landed on a shortlist of eight firms, knowing that there was a risk that some would not bid. In practice, two declined to bid. The remaining six responded to an RfP, which we had structured and written to provide candidates with a good understanding of the client. This allowed candidates to put forward the most appropriate person and adapt their proposal accordingly.

Bidders met with the selection panel for an initial briefing as well as final presentations. The process honed in on the aspects the client had identified as being important: the commitment of the actuary to them as a client, demonstrating an ability to get up to speed on the client’s specific schemes, and showing innovative approaches and thinking relevant to the specific circumstances of our client.

But it’s also important that the “softer” aspects are given consideration. Does the actuary understand you as a client? Will they be able to challenge you and present complex ideas simply? Will you get on well?

The results

Through an exercise that really sought to test the key criteria for our client, whilst not neglecting the “hygiene” factors, our client decided on an actuary with who they are very happy with.

Our market knowledge identified the most appropriate candidates, and our process drove candidates to demonstrate the characteristics, and skills, required to meet the needs of our client.

Key Learnings

  • Market knowledge is critical in ensuring the right candidates, and a broad range of candidates, are included on the shortlist.
  • Whilst having a detailed idea of the more measurable aspects of the service that carry greater weight in any decision, it is also important to consider the “softer” side too. Will you be able to work with the actuary?
  • Providing the candidates with the information they need to put forward their best proposal, and the individual best suited to the client’s ways of working helps to ensure you receive the best proposals.

Transforming Administration

Where there are issues with your administration, working collaboratively with your provider can help to turn the service around. Of course, the administrator needs to be proactive in recognising the faults in the first place!

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Recognising the fault

Our client was experiencing issues with their administration service. They were on a legacy system that wasn’t well integrated, and were being serviced from an office that was experiencing some resource challenges. The provider was distracted and the combination of these factors led the service quality to fall.

The service had become so poor, and the response so inadequate that the client was considering other options in the market.

However, the provider acknowledged their faults and recognised the flaws. They took steps to address them; and quite radical steps given how much easier it is to make promises to improve current services. Instead, they suggested a change of office and a change of system!

We were appointed to support the client in the review of the provider’s proposals and to challenge the provider. Essentially, we were to bring our experience of such exercises to the project and to be a nuisance on our client’s behalf.

Working together

The proposals were sensible, but flawed. We were able to bring our knowledge of administration and practices in the market to help our client and the provider shape a proposal that would meet the needs of both parties.

This included having a robust transition plan to ensure a successful transfer of the services, handover of knowledge and implementation of the new system. All of this to be achieved whilst improving the business as usual administration.

The provider demonstrated a clear commitment to service improvement and working in partnership with our client.

Our client also took the opportunity to review the contract. It was outdated and no longer reflective of the services in place. Again, when it comes to contract, a recognition that the document must be mutually beneficial is important. The relationship needs to be a partnership, or it will struggle to go the distance.

The results

With our input and challenge, the client was able to recommend to the Trustee Board that they remain with the incumbent provider, subject to successful delivery of the project and renegotiation of the contract.

By demonstrating a commitment to rectifying past issues and to maintaining a successful relationship, underpinned by a quality service, the provider was able to rescue a failing relationship.

Clients need to recognise that administration sometimes goes wrong, and providers need to stand up and acknowledge where this has happened. It is how providers react to service failures that can turn a client into the best of advocates.

Key Learnings

  • A key part of saving any failing relationship is recognising your failures in the first place.
  • Working collaboratively to develop a proposal and build a relationship that meets the requirements of both sides it the best way to approach a project.
  • Independent support can help ask the challenging questions on behalf of the client.

Approaching Risk Management

Our client had a long-standing risk management process, which was effective in the past. It was now stale and no longer tied into the scheme's objectives. We helped our client refresh their approach to risk management.

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The challenge

Risk management had become “stale” and needed refreshing or so thought the Trustees’ risk committee at least. Consequently, Muse were commissioned to conduct an independent review of the Trustee Board’s risk management framework with a view to improving effectiveness.

The approach

Muse worked with the risk committee and the pensions team to understand the scheme’s approach to managing risk. Most importantly, we met with the Chair of each committee to discuss how the Trustee Board and each specific committee managed risk.

We discussed key themes from our findings in a Trustee risk workshop. To set the context, we shared how other similarly sized schemes manage risk and the processes and tools they use to do so.

We then considered what a fit-for-purpose risk governance framework might look like, incorporating selective delegation of risk management and the concept of risk owners. These ideas provided a useful template, against which the Trustees’ current framework was compared. The Trustees quickly concluded that their risk governance framework could be enhanced to become more effective.

Next, we debated how the Trustee Board could derive the maximum benefit from the time available in board meetings. There was an acceptance that significant time was allocated to matters that could be safely delegated to committees or the pensions team. The Board recognised that best utilisation of meeting time is critical if the Trustees are to maximise their governance impact.

In conclusion, the Trustees realised that to refresh their risk management process, they needed to address not just risk governance but their approach to broader scheme governance.

The outcome

To ensure the Trustee Board spends time on the right risks and prioritises issues effectively, it will first review its risk appetite and then agree its core strategic risks. The objective is to ensure risks are managed by the most appropriate “risk owners” (i.e. at the appropriate level).

The composition and roles of committees will be reviewed to ensure that focus is on the right things. The roles of other key players in the governance framework will be similarly reviewed.

Muse continues to work with the Trustees through participation in the working group charged with responsibility to recommend and oversee the implementation of changes to bring about enhanced effectiveness of both risk management and the broader governance framework.

Key learnings

  • It is impossible to divorce risk management from other aspects of governance.
  • Risk registers are an essential component of any effective risk management process, but the process can only be truly effective if it is owned and driven by experienced and engaged people.
  • Trustee Boards should determine whether sufficient time is devoted to those issues that are critical to the achievement of core strategic objectives. That must include time spent identifying, analysing and monitoring risks that materially threaten the achievement of those objectives.

Moving to a Master Trust

We helped our client to review their DC arrangements who later decided that a Master Trust might be right for them. But they needed our support and independence to test the waters.

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The challenge

The company had recently undertaken a strategic review of its DC arrangements and concluded that there were efficiencies to be made in the DC running costs. A Master Trust might provide the most cost efficient means of providing the DC benefits, but as their DC adviser also runs a Master Trust, the company recognised that the adviser would be conflicted.

We were appointed as a result of our independence and ability to objectively assess and comment on the market, as well as helping to capture our client’s requirements. We led an independent review of options, which subsequently developed into a selection exercise, once it became clear that a Master Trust was most appropriate for the company.

The approach

We developed a request for proposal (RfP) built around the company’s requirements for cutting costs, reducing the governance burden and providing all its DC arrangements under one umbrella. Working with the company, we short-listed a selection of five different Master Trust providers (covering different approaches) and asked them for a response. Based on these responses, we were able to choose three providers that could best meet the company’s requirements.

Having decided that a Master Trust was the best option, the client agreed to proceed with a selection exercise. We then developed a more detailed RfP focusing on the investment product, services to members, transition costs and implementation process. Each provider was given the opportunity to meet the company and ask questions about its requirements. We summarised the responses for the company focusing on what was most important to make a decision and providing independent commentary. The providers presented their propositions to the company in a day of face to face meetings. The company assessed each provider using a selection criteria matrix, prepared by Muse, with criteria weighted by importance.

Following the presentations, it became clear that one of the providers could be discounted leaving the choice between one of two providers. As each provider offered a good product, with good service, at a competitive price, we were asked to build a business case for each to aid the company’s decision making.

The business case set out a side-by-side comparison of the costs to move to a Master Trust for the company and members, and the value that could be added to members through the investment strategy, administration, communications strategy, guidance/ advice and options for members to take their benefits flexibly at retirement.

The outcome

The Master Trust providers were compared in light of their services, product and value to the company and members. A conclusion was made to move the DC arrangements to the provider that the company felt would best meet its and the members’ needs.

The Master Trust market is laden with conflicts, and it is often the case that advisers could move their client into their own Master Trust solution. This might be an easy option, but not necessarily the right one for members.

We were able to support our client, provide an independent assessment of the Master Trust market, and help them make an appropriate decision. We have no commercial ties or vested interests with any supplier, and our objective input was invaluable in helping the client reach a decision.

Key learnings

  • The Master Trust market is rapidly developing. A time will come for consolidation. It is important to know that assets are secure and that discontinuance and exit provisions are clearly understood.
  • Costs vary by provider and can include AMCs, monthly administration charges, implementation fees, annual governance charges, at-retirement costs to members and advice charges. Be clear on all the costs and extra charges before making the decision to move to a Master Trust.
  • New providers are coming to an already saturated market and are unknown in respect of their quality and capabilities, and their ability to achieve scale. Consider all the risks.
  • Understand the member experience and how the provider will engage and educate members on your behalf and the additional costs to tailor communications.
  • Be comfortable in the governance structure and independence of the Master Trust’s Trustee Board.

What is the right DC scheme for you?

The sponsor’s governance committee wanted to consider their DC provision and asked us to support them through the process. We talked them through their options to find potential solutions.

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The challenge

The sponsor had put in place a contract based scheme early in the 2000s, and had changed provider in 2007. As the scheme had grown and become the main scheme for employees, and the governance committee had taken a more active role in the scheme, it was becoming clear that the solution was not matching the needs of the sponsor nor the scheme members.

They had been speaking to existing advisers, that weren’t independent from a potential solution, and the advice they were getting would vary and was open to conflict. Should they stick with a contract based scheme as the right solution for the future, or should they consider switching to a Master Trust, or even setting up their own Trust based scheme on either a bundled or unbundled basis?

Muse was appointed to support the review as a result of our independence from the potential solutions – we were able to comment on the merits and drawbacks of each approach, as opposed to focusing on the one that allows us to recommend our own solution.

The approach

We suggested running a workshop that included both sponsor and governance committee representatives to consider the options available to them. In advance we shared key information about each of the options, as well as a number of questions for the attendees to consider. The aim was to capture and agree the objectives for the pension scheme. What would make the scheme a success for the sponsor, and what additional objectives would make the scheme successful from a member’s point of view?

The outcome

The workshop was a great opportunity for all parties to share their views and whilst, as always in these meetings, there were some disagreements, a common ground was found, and a set of objectives was agreed. Each of the options was considered against the objectives, and the conclusion as to the right type of arrangement was made.

Key learnings

  • Beware the conflicts of interest in the DC space. It is likely that at least one of your existing advisers can ‘take the problem away’, but if it is not the right solution, then your problems could multiply.
  • The differences between contract-based and trust-based schemes are diminishing. Governance requirements for contract-based schemes are rightly increasing, but they are also increasingly flexible, meaning the need to have an own-trust solution is reducing.
  • An agreed set of objectives that capture both the sponsor and member needs, can help direct you to the single solution that works best for all.

Trustee Resourcing

Trustees sometimes end up in a more operational role by default. One client, concerned about the sustainability of their governance practices, took steps to smooth the way for succession before it became an urgent issue.

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The objective

We often work with trustee boards who, for various reasons, have found it necessary to assume a more operational role: more like an executive management team than the non-executive role intended for trustees.

Our client was concerned about their governance. They found themselves relying on the time commitment and knowledge of their longest serving trustees. Little was documented and historic knowledge and context was kept in the minds of those that were there at the time.

The trustee rightly recognised the significant risk this represented to the scheme and their members. They needed guidance on how best to address and mitigate this risk. Firstly through appropriate succession planning, secondly through documentation, and thirdly through retention of the key trustees.

The trustee was interested to know how other smaller defined benefit schemes were tackling these issues, and, indeed, whether they were experiencing them at all! Through our relationships and market knowledge, we were able to assemble a group of peers to undertake a short benchmarking survey.

The method

Having identified a suitable group of benchmark pension schemes, we contacted them to gauge interest in sharing their practices confidentially. The comparator schemes were issued with a brief survey seeking to understand the variety of approaches to succession planning, remuneration and knowledge documentation.

We collated the data and shared the results with the participants on an anonymous basis. The results of the survey are confidential, but we can share the high level learnings.

The results

Unsurprisingly, the practices were widely varied, again proving the old adage that there is no one-size-fits-all approach. However, what was surprising is that the issues faced by our client were also being faced by many of their peers.

Smaller DB schemes can be heavily reliant on their long serving trustees and need to plan for the day when they step down. A number of participants were concerned that their current model was at risk as long serving trustees moved towards retirement. The retention of key trustees, and provision of in-house trustee support, is also becoming more challenging as many schemes become legacy matters.

A number of schemes addressed these issues by appointing a specialist outsourced pensions management provider, whereas others, like our client, have adopted a more operational role themselves.

It is common practice to remunerate trustees, although this may be limited to the trustee chair, or pensioner trustees only. The approach to remuneration was varied, with some offering simply a nominal fee for a set number of meetings, and others often something more akin to a salary for a more executive role.

A number of schemes had appointed an independent trustee to address a specific skills gap and provide additional resource. Where this is the case these independent trustees were usually chair of the trustee board.

What was common across the board was that knowledge needed to be documented: a challenge facing many schemes, not just those at the smaller end of the scale.

Through the survey results and the context we were able to provide around them, including our views on best practice, our client was able to drive through changes to how they approached their governance. The case for change was supported by evidence from their peers; a particularly powerful way to argue a case!

Key Learnings

  • Whilst practices vary around remuneration and succession, there is a common problem with documenting the knowledge of the long serving members of the board.
  • Using a peer-group comparison can be powerful way to present an argument for change to a Sponsor with budget and resource constraints.

Assessing Trustee Effectiveness

Self-assessment is reliant on objectivity, which is easier said than done. In this case study we look at how we helped a client determine if self-assessment is truly effective and focus on beneficial ways of working.

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Is self-assessment effective?

Self-assessment is reliant on objectivity; an ability to detach yourself from the daily rigours of trusteeship, to take an impartial look at the way you work, to be open-minded to ideas and challenge the established procedures, and to retain neutrality against criticism.

Whilst these are qualities that we see in many Trustee Boards, they are hard to apply when you are entrenched in the detail of running your pension scheme. How do you genuinely step back from the processes, procedures, tools and issues that surround you daily and consider: ‘Could we be working more effectively?' or ‘How could we do things better?'

Survey findings often show that Trustee Boards rate their own effectiveness highly, and yet facilitated assessments will often highlight shortcomings even where trustee confidence is high. This isn't a sales pitch for nit-picking, but more of an observation that only through independence is objectivity truly achievable.

An example

Our client rated themselves as fairly effective, but, admirably, they wanted to ensure that their view was accurate. Through a series of interviews, meeting observation and an online trustee effectiveness assessment, Muse were able to independently assess effectiveness.

The Trustees are commendably dedicated and knowledgeable, and they undertake a significant amount of the operational management themselves. With being so rooted in the minutiae, it is not surprising that we identified some issues to work through.

Where there are issues, there are risks

This is the flipside of having a group of energetic, engaged and diligent Trustees: an under-reliance on support. The DIY approach often means that structures and practices are not formalised or preserved for future generations of Trustees. The ineffective use of support represents a risk, and potentially damages the long term effectiveness of the Trustee Board.

Similarly, the committees had wide-ranging agendas. The limited delegation to support teams and advisers meant that decisions were often made in restricted time due to the weight of topics to cover. Consequently, decisions were not always being challenged as rigorously as good governance demands and the level of activity demanded by the committee agendas limited the time available to focus on the future; the strategic journey.

Trustee Boards should take the time to step back, question themselves, discuss and debate options openly and ensure there is a unified vision to drive the scheme fowards.

How did the Trustees benefit?

Through an objective assessment, the Trustees were able to identify and address some issues that they had not had the time to see for themselves and to develop plans to manage the risks, and develop the tools and processes they need.

Key learnings

  • There are limitations on how effective any Trustee Board can be when they are mired in the detail.
  • In assessing their own effectiveness, Trustee Boards should challenge whether they can truly be objective and know what they don't know?
  • Sometimes it is difficult to "see the wood for the trees" and Trustees should learn to recognise this and seek independent challenge and assessment.
  • There is a risk that issues will slip through unnoticed if the Trustee are not challenging themselves rigorously.
  • The work of a Trustee is demanding and the challenges are constantly evolving, so it is important that Trustees do take the time to consider their effectiveness, be critical of themselves and highlight shortcomings.

Programme Management: Benefits

Have you ever found yourself in the position of facing a forced change? How do you manage a complex project with tight deadlines at short notice? In this case study our client needed to select a new TPA within a limited time.

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It all starts with a crisis

Have you ever found yourself in the position of facing a forced change? How do you manage a complex project with tight deadlines at short notice? Well, our client needed to select a new TPA within a limited time, which was beyond their control. They not only had to complete this change, but manage a large data and pension over/ underpayments rectification project at the same time and across both incumbent and successor TPAs.

To help tackle this challenge the Trustees appointed Muse Advisory as Programme Manager to act alongside the Company pensions team. Together we oversaw all activity involving two TPAs, a specialist data firm, lawyers, actuaries and communication specialists ensuring the programme met its objectives whilst maintaining the buy-in of all stakeholders through a complex set of issues.

What does a good Programme Manager look like?

There are a number of popular project management methodologies, such as Prince 2. However, effective programme management requires skills beyond core project management techniques.

To start with, a Programme Manager needs to be pragmatic, able to apply common sense to a situation or a problem. They should be a facilitator; relationship manager; a negotiator; an effective communicator, a leader. The list could go on: knowledgeable, able to leverage relationships, a unifier able to encourage and maintain buy-in to objectives from all parties, including a departing incumbent - not an easy task!

Why did this client need a Programme Manager?

Given the scope of this project - TPA selection, implementation, transition, data and pensioner rectification - it was critical that the programme manager was able to commit to the time demands and to be available at all times. The pensions department was already stretched by a multitude of challenges, so it was important to have dedicated independent support with the appropriate skill, knowledge and capacity.

So, how did it turn out?

Through engendering effective relationships and securing commitment from all parties whilst keeping a focus on client objectives, programme goals and risks, the Programme Manager provided the necessary leadership to make certain all parties collaborated effectively in managing all workstreams and ensuring that both Trustee and Company objectives were successfully met.

The Programme Manager encouraged an open and honest dialogue between all parties and was accessible to all involved. She and her team proactively drove progress, anticipated issues and facilitated remedies.

Effective Programme Management is crucial in bringing together the strands of a complex project and those involved to deliver successful outcomes.

Key learnings

  • The programme manager needs to work very closely with the client team; openness, prompt communication, addressing issues as they arise and attention to detail are all key characteristics.
  • Programme Management is not about adhering to a specific methodology, but applying it practically and with common sense.
  • The demands on in-house pension resource often limit capacity to manage large change programmes at short notice.

Resourcing the Pensions Department

Our client asked us to conduct a benchmarking exercise investigating in-house company pension teams. During a series of interviews, 10 companies shared their current resourcing structures, activities, challenges and drivers.

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How do you know if you are resourced effectively?

Our client asked us to conduct a benchmarking exercise investigating in-house company pension teams. During a series of interviews, 10 companies shared their current resourcing structures, activities, challenges and drivers.

We gained valuable insights covering schemes with a membership range of 15,000 to 130,000 and scheme assets from £1.5bn to £10bn (with other clients, the schemes approached have been smaller as they have to be relevant to the client's scheme size). We openly and confidentially discussed how their pension teams are resourced, what drives their decisions and the challenges they face in a continually changing environment.

Same challenges, different answers

Pensions departments face a number of challenges and influencers. Some are common and familiar: complexity of benefit design and investment strategy, and pensions within a total reward strategy.

It is those that are less familiar and only now growing in prominence that challenge accepted roles and structures. For example, the level of member engagement, Trustee and corporate approaches to governance, de-risking journey plans, data issues, liability management exercises, auto-enrolment and the increasing importance of a strong communications strategy.

We also noted significant changes in the demands on pensions departments and the skill sets required to meet them. The pensions team is increasingly expected to be involved in strategic and journey planning.

No two pensions departments are alike and each is rising to these challenges in their own way.

New skills

There is an increasing need for specialist skills within the team. Financial controls and investment expertise are becoming highly valued skills. Relationship management is fast becoming a ‘must-have', including contract management and facilitation skills as well as the ability to balance the demands of a number of stakeholders.

Working in such a rapidly changing environment is arguably having the most noticeable impact on the role played by the Pensions Manager and the skills required to fulfil that role effectively. It is commonly asserted that the role of the Pensions Manager is evolving, but the big question is ‘Will the role exist in ten years, and if the answer is yes, what will it look like?'!

Everybody knows that one size does not fit all...

It goes without saying that there is no universally applicable solution or magic formula, but neither is there a widely-accepted starting point. It is crucial that companies develop the solution that best fits their circumstances and culture and make sure it is adaptable to changes.

Given likely resource and headcount constraints, the changing requirements and the increasing conflicts, a number of companies are reviewing their resourcing against the challenges they face, the demands on their team and the priorities of all stakeholders.

Key learnings

  • Evolution of the Pensions Manager role is driven by an increasing demand for new skills to confront the challenges now facing sponsoring employers and Trustee Boards of pension schemes.
  • In facing these challenges, Pensions departments are finding different answers.
  • There is no easily identifiable key driver of change or solution. It is important to consider resourcing within the full context.
  • It is crucial to find the solution that fits your circumstances best. Priorities should be determined with input from key stakeholders.

Governance: Think cycles, not boxes

Our client wanted us to help them challenge their ideas and ways of working. They wanted to ensure their DC consultant market review was more in-depth than just a 'tick-box' exercise.

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The challenge

Governance is becoming better understood, and more clearly defined. It encompasses everything about governing the scheme. But with a busy agenda to manage trustees can fall into the trap of overlooking the importance of maintaining effective governance review processes. Some may find it a challenge to prevent governance review processes becoming a periodic box-ticking exercise. Trustees must keep their minds open to what is changing around them and for the need to improve governance. Indeed, continuous improvement should be an objective on every trustee board's agenda.

A case in point: our client was approaching a regular review of their DC consultant. They had an excellent relationship with the incumbent, but wanted to ensure that the review process didn't just enshrine the current practice, but challenged the status quo. They wanted to know whether the current arrangements were still right for them.

Muse were appointed to provide independent insight, and to challenge their outlook and approach.

Taking a fresh look

Governance can be viewed as a compendium of processes and controls to manage risk, and ensure effective operation of the pension scheme. Taking this view alone, it is easy to see how review processes could just as easily enshrine poor practice, as encourage good practice.

Any review process should challenge the status quo, but after many years with one consultant this becomes hard to do. Relationships are strong, ways of working understood, and advice and consultant views are familiar.

Our challenge was to help the client consider objectively what they required from their consultant, both now and for the foreseeable future. Through discussion with key stakeholders we built and agreed a profile of the Trustee's ideal consultant.

With a clear profile of knowledge, experience, skills and other attributes, the Trustees were then able to challenge whether the incumbent was genuinely capable of providing the right services, in the right way and at the right price and to meet their expected future needs.

Effective governance

A sound review process should not create change for the sake of change, but ensure that the status quo is constructively challenged. That is one way to pursue continuous improvement and avoid becoming trapped in a box-ticking cycle. All aspects of governance are worthy of periodic review, whether that concerns the trustees' collective effectiveness, their ways of working, the risk management framework, operational controls, service providers, professional advisers and so forth. A cycle of purposeful reviews enables governance arrangements to evolve over time, thereby avoiding the pain of wholesale change when the demands of governance have moved on but governance practices have not.

Key learnings

  • At the beginning of any governance process, do challenge whether it will be worthwhile and truly challenge the status quo.
  • Setting out your requirements and criteria are useful tools to challenge ways of thinking at the outset.
  • Good governance is not about change for change's sake, but unquestioningly enshrining the status quo would certainly be poor governance.

The Decision to Outsource

A decision to outsource should not be taken lightly. However, it often appears to have been clearly signposted. There are a number of drivers that put outsourcing on the table, but it requires that special catalyst.

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The key ingredient

A decision to outsource should not be taken lightly. However, upon reflection, it often appears to have been clearly signposted. There are a number of drivers that put outsourcing on the table, but it usually requires that special catalyst; that key ingredient.

For our client, it was the imminent departure of a key staff member. A review identified underlying issues laying ‘dormant', readying to erupt at a later date to demand urgent attention.

In this case it was outdated technology; limited resource availability and high costs. These reasons are familiar to many, but in themselves were not a powerful enough driver.

Although the process itself is largely the same as any other selection exercise, first time outsourcing presents unique challenges that require strong project management.

Many, many cooks

Each company is unique, full of little quirks and eccentricities; there are a variety of stakeholders with differing opinions, motivations and sensitivities; there are the specific service requirements; and, there is always a reluctance to relinquish control!

Perhaps the most critical of these is the multitude of stakeholders: the administration team, the wider pensions team, the company as a whole, the trustee, the bidding TPAs. And that's not to mention the potential for other advisers to become involved, for example the actuary, a data cleanse specialist or the legal advisers.

This gives a multiplicity of views, opinions and attitudes. The company wants to cut costs, the pensions team and trustee want a good service for members and the administration team want security of outcomes (e.g. TUPE)!

Somewhere in this mixture there needs to be a project manager. Somebody that can drive others towards agreed objectives, secure buy-in and maintain motivation, manage personalities, be flexible to the competing demands and all with an awareness of the sensitivities involved. This was part of the role that we took on for our client.

But tasty broth!

Through the successful delivery of the project, our client was able to appoint the right administrator for them. An administrator that was able to TUPE their existing team, an administrator located nearby, and one that was able to deliver the precise scope of services required.

First time outsourcing is never easy and it always brings unique challenges. The number of stakeholders, the sensitivities and the cultures of each company make for an interesting and demanding project.

Key learnings

  • There are so many variables that no first time outsourcing exercise is likely to be the same, and they should approached with this in mind.
  • Often underlying issues aren't urgent enough to precipitate an outsourcing decision; there normally needs to be a catalyst.
  • A strong project manager with the right skills is needed to bring together the multitude of stakeholders and maintain focus on the agreed, central objectives.

Consolidating Advisers

If you have a number of schemes, it is common to find them administered by different parties. In this example, our client had many legacy closed schemes and five different administration providers that they wanted to bring into one.

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Bringing it all together

Where a company has a number of legacy pension schemes as a result of acquisition, it is not unusual to find them administered by different parties. In this example, our client had many legacy schemes (all closed) and five different administration providers.

They had been focusing on streamlining and rationalising their arrangements for some time. They had already created a common Trustee Board, and consolidated actuarial and investment advice as part of a larger project to bring the schemes under a single Trust Deed. Administration services were next on the agenda.

We were appointed to assist in selecting a suitable administration provider and help the Trustee through the challenges presented when consolidating advisers.

Be wary of the challenges

There are inherent risks in administration and the potential for costly errors. Therefore, the Trustee needed to be comfortable that they weren't moving to an administrator for the wrong reasons. Consolidation was not treated as an end in itself, and lower costs were not the only driver in choosing a provider. Yes, of course, the Trustee wanted efficiencies and cost-savings, but they also wanted to minimise risks, improve governance and ensure that members received a good service.

A particular challenge of consolidating advisers is the management of the incumbents. You need to ensure that they are treated fairly and are bidding on an open playing field. Providers should be judged on their capability to deliver a service to the consolidated scheme. Equally, the administrator needs to be encouraged to view the opportunity as if the Trustee were a new client.

The removal of any preconceived notions will lead to a more competitive tender, where each provider feels equally able to win the contract. This will give a better solution, with the selected provider best able to deliver services to the consolidated arrangements.

Plenty of benefits, plenty of risks

In the end, the Trustee selected one of their incumbent administrators. Although, costs were slightly higher than the runner-up, the transition risk was minimised by their incumbent status. Overall, cost savings were still achieved, and a year down the line, good member service has been secured. Additionally, the Trustee now has simpler administration governance with all schemes being under one roof.

Consolidation can bring significant benefit, but you should not ignore the challenges. You need to approach it with an open-mind, sensitive to the incumbents and wary of the risks involved. You need to ensure you are pursuing the right goals and have fully assessed what you hope to achieve from consolidation and considered whether these are realistic goals.

Key learnings

  • Establish your goals and objectives before the process starts, and test that they are achievable.
  • The benefits are evident, but these should not be pursued if the risks outweigh the possible gains.
  • You need to approach the selection of a provider with an open-mind, and be wary of the challenges involved.

Merging Trustee Boards

Each trustee develops a way of working and culture. They generate different ideas; with different resources and knowledge. So what happens when they come together? This case study looks at how we helped tackle the change.

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Different routes

Each trustee board develops a particular way of working and an individual culture. They generate different ideas; have different resources and knowledge. In short, each is unique. So, imagine trying the challenge of combining two very different trustee boards. This was what our client faced after the business had acquired a second large pension scheme as a result of an acquisition. Once the scheme merger negotiations were completed Muse facilitated the transition of the two boards into a successful merged trustee board with responsibility for the greatly enlarged pension fund.

The objective: combine two trustee boards that displayed radically different characteristics and ways of working. Quite simply, the boards weren't just different, they were at opposite ends of the spectrum on many issues; funding level; investment strategy; perceptions of covenant strength and so on. Likewise they had evolved radically different governance practices: multi-faceted support team vs access to a single Pensions Manager with wider responsibilities; delegations to committees and beyond vs ‘trustee board does everything'; outsourced administration vs. in-house, and, sophisticated vs. straightforward approaches to investment strategy implementation.

Meeting in the middle

The new scheme was to be: much bigger; arguably under-resourced and likely more demanding. It would also take some trustees outside their comfort zones. For example, one scheme brought with it a substantial legacy DC section that represented unfamiliar territory for the trustees of the other. To complicate matters further, the only time the two boards had met had been in negotiation mode to finalise the merger.

If your GPS sends you off in one direction, it is often tricky to fathom why someone else has favoured an alternative route. We wanted the two boards to understand ‘whys' and ‘hows' of each other's journeys. Separate workshops were arranged for the two boards at which they were briefed by the other's professional advisers so they could study the maps and understand the choices and turns each other had taken along their respective journeys to date.

Next a mutually convenient ‘meeting point' was agreed - a suitable point to start the new, shared, journey into the future. We facilitated two workshops. The first focused on open, honest, high level discussion about the skills and experience they shared and the issues that needed to be prioritised. The second got into the detail of how they would work together and organise themselves to crack on with all the matters in hand.

A new journey

As a result of careful planning and commitment to each other, these very different boards came together and hit the ground running. By taking the time to: understand each other's journeys; develop respect for each other; agree objectives and determine the best utilisation of their combined resources and skills, the trustees have set off on their new journey all pulling in the same direction.

By the time of the merger, the trustees had developed a framework for their future governance that was appropriate to the needs of the combined pension schemes. Time will tell if the trustees got it right first time. The likelihood is that they will review and want to fine tune in the light of experience. But in the meantime the investment in planning should ensure that effective governance has been maintained both through and after the merger.

Key learnings

  • Regardless of the challenge, stepping back and taking the time to understand and discuss the issues can help achieve good outcomes.
  • It is important to dedicate time to setting governance objectives, and openly discussing the right approach.
  • Trustees need to be open to challenge, and willing to change the way they work as circumstances evolve.

Home and Dry?

You're sailing smoothly to your destination, then your Pensions Manager suddenly wants to retire. How do you navigate the bumpy terrain to keep the destination moving nearer?

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The status quo

With a destination in sight, many trustee boards are trying to ensure that they get there as quickly and safely as possible. So what should you do if your radar screen goes blank? Your Pensions Manager wants to retire and you need to replace the person responsible for the day to day management and direction of the scheme.

This was the challenge for one of our clients. They came to us for ideas about how they could keep their destination in sight, without the knowledge that had been acquired over many years. While undoubtedly not unique circumstances, these can be very unsettling times; especially if the person leaving has become the eyes and ears of the trustee board and knows the whole history of the scheme. We worked with the trustee board and outgoing Pensions Manager to identify the best way forward.

Bobbing around

No-one likes a period of uncertainty. Often the easiest way forward is to do what has always been done. However, it was best for our client to think about what they wanted to achieve and make sure that they were on the best course.

The client was able to reflect on their requirements for the future, not simply resource on the basis of what has always been done and they decided to outsource the pensions management and trustee secretarial support. We were then able to support a search of the market to identify the best equipped service providers. During the selection process we worked with the providers to ensure that they had a clear understanding of the requirements. After all, it is in everyone's best interest to get a good match. Having received several high quality proposals from providers, the strongest candidates were invited to meet with the trustee board face-to-face. The trustee board went on to appoint their preferred candidate.

The new crew

As a result of thinking through their needs afresh, the trustee board identified a strong requirement for contract and relationship management skills. They were able to make sure that the new provider could deliver the exact skills and understanding, following their careful scoping out of the market for the required services and addressing any potential conflicts.

Lastly it was important for the trustee board to remember that they still ‘sat at the Captain's table' and ultimately as such were responsible for the whole ship. They put a process in place to review and evaluate their new equipment.

Key learnings

  • Take time to identify any resourcing ‘sand banks' ahead of schedule. It is so easy to sit below deck, only to peep out and find you have almost run aground.
  • Analyse your resourcing model to identify any key-person risks and plan to resolve them. Actions or changes you take now may not need to be dramatic.
  • The market is changing and there is a high degree of flexibility in the solutions available.

Transform or Transition?

Administration is a relationship, not just a service. You cannot have one, without the other! Two of our clients were struggling with their administration. We helped them find a way forward - should they stay or should they go?

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Anything sound familiar?

'Administration is tricky. Errors occur. Mistakes happen. That is the nature of the beast.' This is a message that some have heard from their administrators over the years. But, what if it's not just day-to-day errors? Are there more fundamental issues? Perhaps the transition to your administrator was poor, your data may be unreliable or errors have gone undetected and have compounded.

We have recently worked with two clients in this position. We were appointed to help them find a way forward. Essentially, should they stay or should they go?

Outsourced administration isn't just a service. It's a relationship as well. And in our experience, it seems you cannot have one, without the other!

If it's broke; fix it

There are risks in moving administrator. Not just to the data, but the disruption to members, reputational damage, financial and time costs.

A possible option is to initiate a transformation project to work with the incumbent administrator. The project would encompass the full service and work to bring them into line with trustee expectations and best practice. This is not easy to achieve, and it will depend on the state of the relationship. Fixing the services might not be appropriate if the relationship is lacking trust or commitment.

Counselling required

All relationships rely on trust and when it hits a bump in the road, the question is: can you move on? Our clients had faced issues with their services, and had lost faith in the capabilities of their administrator. However, given the risks of transitioning, it is important that trustees really consider whether the relationship is beyond repair. You can have a strong administration service, but without any trust in what the administrator is doing, the relationship is unlikely to last for long.

A fresh start

So, by way of illustration: one of our clients went to the market. The relationship was irreparable. Another took steps to fix the issues and move forward. What is important is that you don't make a snap decision, but evaluate the options.

If you are facing service issues, the automatic response should not be to move away, but to look at your provider, and yourselves. Truly challenge whether the goals and objectives are correct, whether they are shared between the parties, whether the relationship is open and transparent, and whether you are in a partnership or a one-sided relationship.

Administration will always be susceptible to errors. It's how you, and your administrator respond, that determines whether the relationship it fit for the future and will work.

Key learnings

  • Transforming the service is very difficult and might not be right if the relationship has failed.
  • Before any decision is made, it is important to understand the issues and the challenges from both sides.
  • Taking the time to assess the relationship can help prevent the same mistakes. Assessing where the relationship went wrong, for example poorly understood objectives, will contribute to making the next relationship work in harmony.

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