What does TPR say?
The main points of TPR’s guidance are
- Develop and regularly review your scheme’s business plan. This will help you to manage your scheme effectively and get good outcomes for members.
- Your business plan should help you to set a clear strategy and inform all that your board does.
What do you think?
Do our mini-survey on Purpose and Strategy to tell us what you think. It only takes about 5 minutes.Take Our Survey
We will publish a summary of findings on this page shortly before TPR’s next guidance in the series is issued.
What do we think?
TPR’s latest guidance looks at the theme of purpose and strategy, two things that are crucial to any board governing an organisation. Particularly important for a pension scheme trustee board - joint and several responsibility for other people’s money facing continuous change in the external environment.
To have some formal views and examples from TPR on this theme is welcome. We thought we would add our own penn’orth, based on our clients’ experiences.
A safety warning: we will be using the traditional analogy of a journey, but we thought we would travel the route in an aeroplane that needs some careful handling. There are a lot of parallels!
Before you embark on any flight, you need to know where you are going and why, and be confident that you know how to fly the plane safely. Not just you, but your co-pilot and passengers, the authorities and the base and arrival airfields. Everyone needs to understand the broad aims and strategy, be that self-sufficiency or buy-out for a pension scheme and what this means in practice. ‘Where to and by when?’
It’s no wonder the terminology of flight planning and glidepaths is so common in our industry.
Before you leave the airfield, you need to tell the authorities where you are going and when you expect to get there. And the airfield’s operator needs to be OK with that. The parallels with the Trustee Board’s planning and its engagement with the Scheme sponsor are clear: an agreed destination and timescales.
Then, how are you going to get there? It seems an odd question at first reading: we’re going to fly! However, what altitude will you fly at? Are you experienced enough? What route will you take? Will you stop off on the way? Is there anything you should avoid because it is too risky? What are the latest airspace notices saying? Perhaps the Queen is on a royal flight that crosses your intended route…
So, all these things need to be considered before you even get in the plane. The same is true for the trustee board. What are your objectives to enable you to reach your destination – on investment, funding, governance, member communications & experience, administration - and how much risk can you safely take along the way? Integrating and linking risk is crucial to check they stay within tolerance.
So now you are taking off towards your agreed strategy and destination. Time to sit back and enjoy the ride. Nope! The overall planning is just the start. Throughout, there are milestones and risks to consider.
Let’s say you want to fly along the coast, towards your hometown and point at your house. The course needs to be plotted with waypoints. In the same way, the Trustee Board needs a business plan, say over one or two years for the next steps on the journey, so you can measure progress and adjust if needs be.
Back in the cockpit the pilot is monitoring the glider’s dashboard instruments to see when action might need to be taken. This could be another aircraft, a pocket of air pressure, a thundercloud on the horizon. In each case, the pilot will need to judge how to respond and mitigate the risk. Running out of thermal? Let’s divert to the nearest airfield. Investment strategy not hitting the mark? Let’s check and adjust it.
So the pilot is constantly monitoring progress towards their destination. They keep the map in view and check their watch regularly. They keep a lookout via the instrument panel and through the windows. The same needs to be the case for the trustee board through every part of the strategy implementation.
“Plan, do, review, learn”. It’s as good a motto as any for safely flying your own scheme’s strategy.
What others do
Providing focus to the board, support and stakeholders towards a shared goal. Aligning the governance structure with responsibilities and resources to implement the strategy. Planning ahead to ensure resources, support and trustee capacity and capabilities can drive effective decision making and risk management.
Muse worked with the trustee board to develop its strategic vision for the scheme, looking at the trustee’s long-term funding objective, and its vision for members their experiences and outcomes. Together we developed a strategic plan.
The board’s governance structure was then worked on to reflect the plan: clarifying the roles of the Trustee, the Company, in-house pension team, advisers and providers. Medium-term strategic priorities were agreed to drive progress towards their vision over a period of five years. An implementation plan the defined specific activities, responsibilities, deliverables and success measures. Progress against the plan is monitored each year with formal review and priorities revisited at least every five years.
Developing the plan enabled the trustees to think more fully about what they wanted to achieve and what was possible given the resources, relationships and sponsor covenant.
It has provided focus to the board, its advisers and providers in working towards a shared goal. Importantly, it gave a focused opportunity to engage with the sponsor to have a candid dialogue about plans for the scheme, feasibility of additional funding, investment in in-house resources and collaboration when addressing significant issues.
A clear strategy that drives the delivery of scheme outcomes
Providing focus and aligning resources and the sponsor behind the most critical issues and risks to deliver good outcomes.
Muse was appointed for an in-depth governance and board effectiveness review of this scheme. From the report, the trustee board accepted the need for fundamental changes in the governance arrangements and its relationship with the company as provider of trustee services. We worked with the board to agree a succinct strategic plan to provide focus and align resources behind the most critical issues and risks facing the scheme.
The trustees agreed a strategic business plan based on clear objectives, setting out the vision to deliver good scheme outcomes and identifying the strategic priorities. The outcome of this review is a forward-looking board, with clear objectives, more robust governance and improved sponsor engagement.
Strategic collaboration of advisers
Harnessing the expertise and experience of advisers to provide streamlined, consistent advice focused on priorities to align all parties’ thinking, expedite trustee training and improve trustee decision making.
Muse was asked by this trustee board how it could develop its funding strategy when it has separate advisers for actuarial, investment, legal, covenant and risk management advice. We decided to facilitate a strategy day, bringing all the advisers and trustees together to discuss and develop the basis for the funding strategy. We worked with each adviser and the trustees to agree the messages and issues to highlight on the day and the desired outcomes and output.
We then organised the advisers and trustees into working groups with responsibility for presenting/ workshopping specific areas. The day was organised so that each theme/ idea linked to the next. This purposefully demonstrated how decisions in one area of the scheme’s management could not be made without recognising their wider impact or without asking if they fell within the trustee’s overall risk appetite.
The advisers had to work together to develop the themes in a joined-up way. This meant setting aside preconceived ideas and house views and collaborating on ideas which benefitted the scheme. They met and worked through their ideas together, bringing them back to their respective working groups.
Muse project managed and brought advisers and working group chairs together part-way through to test and debate ideas before developing materials for the workshop. Once the structure and content was agreed, the working groups developed materials and Muse consolidated them, working with the Trustee Chair to review them.
We then facilitated the strategy day, allowing the trustees to engage with the ideas and suggestions and work together with their advisers to establish a clear framework for their funding strategy.
Advice is now a collaboration between advisers and the board. The expertise and experience of their advisers is now pooled in a focused way, where possible using the same information and data so that advice is streamlined and consistent.
Understanding how best to make investment decisions; knowing what to delegate, which decisions to retain, how to hold others to account, so that decision making is aligned with objectives, is dynamic and more nimble, ensuring the necessary progress is made on the overall investment and funding objectives.
We worked with a client that didn’t feel they were making the best use of their investment adviser, and wanted to consider what the options might be. The Company were already minded towards fiduciary management and challenged the Trustee to think in broad terms about their investment governance. We helped them review their governance arrangements and trustee structure, covering the range of options from status quo, through sole trusteeship, to full fiduciary management.
Governance reviews are about many things, including personalities and perspectives. The Trustee reached the same conclusion as the Company. We, and they, concluded that fiduciary management presented the best option for this particular scheme. They had grappled with the issues and the complexities of their investment governance: what to delegate, what to retain and how to hold a provider to account. They had considered the potential conflicts of interest and satisfied themselves that they were able to properly manage them and be transparent in doing so. With our support, the Trustee had completely reconsidered their investment governance, starting with the possible and ending with a robust decision on what is right for them.
Understanding how to make risk management efficient, proportionate and focused on priorities, so decisions are made and work undertaken with the trustees having a good line of sight on risk, mitigation and the potential impact on what the trustee and sponsor are seeking to achieve for the scheme.
This trustee board felt that their risk management had become “stale” and needed refreshing.
We worked with the board and committees to understand how they managed risk. We facilitated a workshop and mapped out visually how they currently manage risk. It was quite clear that the approach was inefficient and not targeted to what mattered most to the trustees.
The framework took the board through articulating its risk appetite, agreeing objectives, being clear on risk governance, agreeing a process for managing risk, ensuring policies supported risk management and developing reporting mechanisms to escalate risks/ issues and provide assurance.
The outcome is a more strategically-focused board that spends time on what matters and prioritises with risks owned at the appropriate level within its governance structure.
How can we help?
- Work with you to discuss, test, update, agree and socialise your objectives. Help you set or re-evaluate your vision and strategy. This feeds in to your business plan, trustee papers and decisions.
- Work with you and guide you to create your strategic plan; helping you identify the challenges and obstacles to achieving your vision and your medium-term priorities and how you could deal with those, the options available and main risks to be mitigated.
- Develop an implementation plan, prioritising changes and actions that need to be taken to enable your strategy to be implemented successfully.
- Objectively question if the existing strategy remains appropriate and identify any aspects of the plan and its implementation that can be updated.
- Support you in engaging with the sponsor – sharing views, objectives and plans for your schemes and establishing areas of commonality and alignment.
- Review your risk governance and help you embed effective risk management into your ways of working and decision making.
- Help you to integrate risk management by applying a robust framework, considering financial and non-financial risks and their correlation so that important or related things don’t fall through the cracks.
- Work with you to review your investment governance for the future and integrate risk management, to explore trustee clarity on the investment strategy.
- Help you to improve or introduce the use of an investment committee, identify training or additional expertise needed, build understanding of the role of the board in its responsibility for the investment strategy and oversight of the work of an investment committee.
- Support the selection or review of investment advisers, and of fiduciary services, including facilitated discussion of fiduciary service models to help clarify the trustees’ thinking and preferred approach.
- Help you to make sure the trustees confidently develop and own the investment strategy, consider where conflicts of interest arise, and are up to speed with good and relevant trustee practice.
- Test how effectively your current structure and use of advisers supports your strategy. Can you be more cost effective in giving value to the scheme, working at the right level of detail and pace?
- Help you develop a governance framework to enable you to be more strategic and use your resources more cost and time effectively. This helps you decide what matters most to the board and develop a framework of governance, delegations and support to keep you focused on your priorities.
- Help you identify and document the responsibilities of the board, your committees, your executive support, advisers, providers and sponsor to help you ensure that the strategy gets delivered, with all pulling together.
Engaging with the sponsor
Roles and responsibilities
Muse Advisory helps trustees and companies to better govern and manage their pension schemes. We believe that good governance leads to improved outcomes for members; through better fund performance, effective and proportionate management of risk, value for money and cost efficiencies and strategic and dynamic decision making.