Who is guarding the hen house?
5 Jan 2022
“Well-run schemes are those that have access to a wide range of perspectives, knowledge and skills, where everyone has equal opportunity to contribute and challenge from different perspectives.” 1
David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at The Pensions Regulator, wrote those words in his latest blog posted just before Christmas. We whole-heartedly agree with this statement and the theme of his blog, though it is interesting to contrast this with changes happening across the pensions industry and consider which are for good, and which may actually lead to long term harm.
Independent trustees do add value to a trustee board
They bring a different perspective, additional expertise and a focus on helping schemes form and execute a strategy most appropriate for the members. However, it only works if they are genuinely independent. To us, that means having no commercial nor personal interest in the running of the pension scheme other than their own fee and any term of office; both to be managed appropriately.
It is difficult to apply the same rigour of oversight to a service such as adviser services or secretarial support if those advisers or support are from within the same stable as your own trusteeship services, particularly where it impacts commercial or personal interests. Such combinations are a common trend.
One-stop shop market solutions or keep them separate?
One-stop shops can lead to greater efficiency and more joined up thinking. For smaller schemes, especially where governance has not been top of mind, they deliver improvements. But more joined up thinking can make it more difficult to avoid group-think and prevent something from going wrong. And if something does go awry, it becomes much more difficult to call to account and put right if it is impacting your own service, team and commercial interests directly. There are scenarios to be transparent about.
If trusteeship, trustee executive support and advisory/ provider work are all independent of each other, the scheme is more likely to benefit from the richness of thinking, oversight and challenge leading to better decision-making and more effective risk management.
As David suggests in his blog: ”sometimes things go wrong and trustee boards do not take the right path. It is not deliberate and when we see these types of cases at TPR we wonder why no-one spoke up. Why didn’t they ask: are we sure this is a good idea? Are we sure we can bear the risk we are taking? Should we take what we are being told at face value or should we push a bit harder?”.
Meetings may be a little more uncomfortable, but appropriate challenge to the decisions being made, and efficient execution of those decisions, will certainly be to the benefit of the members. And that is what all of us should be looking to achieve in guarding the hen house, as foxes can’t help being hungry.
1 Quotes from David Fairs’ TPR blog, 21 December 2021 – “Why trustee board meetings should be more uncomfortable”