Advisers play a key role in helping trustees manage DB and DC schemes to ensure members receive the benefits they expected and deserve.
In some cases, appointing advisers, such as an auditor for most schemes or an actuary for schemes with a DB element, is a legal requirement. But although trustees often delegate duties to advisers and other service providers, they remain responsible for the work carried out on their behalf.
It’s vital therefore that they engage fully with their advisers to ensure they make informed decisions. Trustees should be confident in their understanding of what each adviser is doing so they can assess whether it's being done adequately and represents good value for money. And they should strive to foster an excellent working relationship with the advisers they employ.
Working better with advisers:
To better understand trustees’ ability to fulfil governance and administration roles in an increasingly complex pension environment we commissioned two pieces of research. The results were far-reaching, and as a result we have published a discussion paper that continues the debate about how best to drive up standards of pensions trusteeship.
In relation to advisers, the research highlighted the significant reliance that trustees place on advisers and the benefits that they can bring to running pension schemes. However, given trustees remain responsible for the work carried out on their behalf, it is concerning that, according to our research, some trustees do not feel equipped to challenge the advice they receive.
For example, the research found that 9 in ten schemes employed advisers but 1 in ten schemes reported they could rarely or never afford to appoint advisers – those tended to be small schemes. Trustees rarely disagreed with advisers although many scrutinised advice in detail. However, not all lay trustees were confident in their ability to challenge professional advisers.
In addition, some trustees, particularly in small schemes, commonly accepted advice without any detailed consideration and failed to regularly review the quality and value for money of the service they received.
While some pension scheme trustees manage their schemes efficiently and competently, many are not meeting the standards we expect, including requirements set out in legislation, which underpin effective stewardship and good member outcomes.
Our discussion paper sets out what we are doing to educate and support trustees of both defined contribution and defined benefit schemes, and – drawing on the findings of our research in a number of key areas – considers what more could be done by TPR and the wider industry in support of raising standards.
The paper asks important questions. On advisers, we want to know what the industry thinks are the key challenges faced by trustees in engaging effectively with administration and investment governance and third party providers and advisers, and what can we do to help them.
We want to reach out to trustees, understand the challenges they face and how best to educate and support them. We will also continue to take enforcement action where appropriate. But ultimately we’ll be asking about what’s preventing trustees from meeting the standards expected – and what should be done where, despite our best efforts, they are unable to get to that level.