Karen Gomm highlights the important role training should play in any trustee's diary today

With the growing dominance of defined contribution schemes, complex investment strategies and the minefield that can be risk management, not to mention a looming pension reform lurking ominously on the horizon, there has never been more pressure on trustees to acquire the right training and get up to speed. Luckily there is an array of training choices and methods available.

Trusteeship in pensions has never been under more pressure and consequently training has never been as important to the role as now, says Martin Jenkins, head of pensions at law firm DWF. "The very existence
of trusteeship as a means of managing occupational pensions depends on the quality of trustee training and support."

Previously trustee training was considered more as an afterthought rather than a carefully considered programme, but since the inception of The Pensions Regulator (TPR) in 2005 training requirements for trustees have been clearly outlined in its trustee knowledge and understanding (TKU) code of practice.

This states "that individual trustees of an occupational pension scheme must have appropriate knowledge and understanding of the law relating to pensions and trusts, the principles relating to the funding of occupational pension schemes and the investment of the assets of such schemes".
The Regulator also expects trustees to be conversant with their own schemes policy documents, namely the trust deed and rules of the scheme, any statement of investment principles and the most recently prepared statement of funding principles.

Trustees are expected to address these requirements within six months of being appointed to the board. Not surprisingly, this can leave some feeling a little overwhelmed but with a variety of training options available this is easily achieved for most.

The responsibility and pressure placed on trustees is immense
but help and advice is available from a range of sources, including
professional advisers and pension organisations such as the Pensions Management Institute (PMI), the National Association of Pension Funds (NAPF) and the Pensions Regulator.

Among the many options available to trustees to help them fulfill
these legal training requirements the first choice for many is TPR’s online toolkit, which is an interactive learning suite designed for the novice trustee as well as those with some prior experience.

"We would recommend the toolkit to all trustees, not just the new ones. In many cases, we are now seeing new recruits to trustee boards being trained up before their appointment starts so that they hit the ground running," says Tyron Potts, associate at Barnett Waddingham.

Alternatively many trustee boards find that structured training sessions at the beginning of each meeting can help them meet TPR requirements effectively, according to GRC consultant Sally Ling. "This ensures the training is bespoke and tailored to those trustees and also challenges advisors to guide and inform their trustees and make sure the training
is relevant and timely. These sessions can incorporate investment strategies, governance, actuarial and administration."

Trustee meetings can also be used to top-up existing training, says Potts. "Setting aside an extra half-hour at each trustee meeting to get 'just-in-time' training from your consultant on topical issues can be a great way to top up trustees knowledge."

There are also many consultants that provide training seminars, including whole day, half day and breakfast sessions, which Potts believes can be very beneficial. "Many consultants offer courses on current and important issues, often open to all trustees, not just that particular consultant's clients. More recently, these courses are being run as online webinars, or set-up as a podcast so trustees can participate from the comfort of their home or office."

Another way of demonstrating compliance with TKU code of practice is to undertake a formal trustee qualification such as the Award in Pension Trusteeship as offered by the Pensions Management Institute (PMI) which is based on the TPR syllabus.

After the initial foundation training has been completed, trustees will want to turn their focus to the more challenging issues facing pension board members. "After the initial session a more bespoke and structured training programme should be developed," says Bryan McDaniel, senior consultant at consulting services firm JLT Benefit Solutions. "This will provide the trustee with the essential knowledge of their own scheme while understanding the broader issues influencing pension provision in the UK."
For many trustees the main areas of focus will be auto-enrolment, valuation, investments and de-cumulation according to co-chair of The Association of Member Nominated Trustees (AMNT), Barry Parr.

However, as the UK pension landscape begins to shift away from defined benefit pensions and towards defined contribution plans this is also now one of the most important areas of training for trustees, according to Ling. "Defined contribution training is now a must as most schemes have an element of defined contributions, such as defined benefit schemes with additional voluntary contributions (AVC)," she says.

However, its not just current issues that trustees should be kept up-to-date with, says Jenkins. "From my perspective it is crucial that training
is not just about updating the trustees on new developments. It is important that trustees acquire the skills to manage processes, advisor input and, on occasions, fellow trustees to ensure that specific projects which matter to their pension scheme can be carried out successfully."

As well as management training, one of the most challenging
areas of trustee training is risk management, according to McDaniel. "Understanding risk management and the ever-increasing governance requirements in order for trustees to meet their fiduciary responsibilities is one of the biggest challenges."

The Pensions Act 2004 raised the importance of risk management and mitigation as well as governance, making these key areas of trustee training. The Pensions Regulator recommends the use of a risk review process to identify existing risks across all aspects of a pension scheme. These risks are then graded by severity enabling trustees to consider each factor and put in place the necessary mitigation if needed.

"A lot of trustees are keen to learn about de-risking solutions especially during difficult times for employers. Even though many of these solutions are typically driven forward by the sponsoring company, trustees are keen to ensure they understand the mechanics and what is expected of them as trustees," says Potts.

Following the recession, he says, there has also been an increase in
the number of trustees interested in corporate mergers and acquisitions and how pension schemes are dealt with in such circumstances.

Another key area of training for trustees is auto-enrolment, which The Pensions Regulator will start to enforce from October 2012. Under the scheme, eligible employees will be automatically drafted into the company pension scheme in a bid to encourage more people to save for their retirement.

Employers will also face compulsory contributions, and existing company pensions will have to undergo certification for eligibility to the scheme. This will present some challenges to trustees as they are faced with reviewing the existing scheme, new members and maintaining contribution levels for a potentially much vaster membership.

While this type of training is critical to the success of pension funds, it hasn't always been a top priority for trustee boards, says Jenkins. "A common complaint about trustee training courses and materials is that
the approach adopted is simply running through a list of items
rather than how these impact on the scheme in question. The focus tends to be on recent developments, case law and new products without a clear assessment of the implications for the pension fund in question."

At the other end of the spectrum, training can at times be too intense and focused on trying to make the trustee into some form of pension specialist, he argues. "Their role is one of management. They need to manage advisors, employer expectations, key projects and their fellow trustees."

There is certainly no escaping the growing responsibility of trustees
in the UK pension fund system, as they play an invaluable, yet increasingly complex role. Whatever training route trustees do decide, Potts believes the key for trustees is to maintain training after the initial introductory lecture which is quickly forgotten. "Trustees need to ensure they have a continuous programme of learning in place. It is no longer acceptable for training needs to be an after thought or a matter visited once in a blue moon."

Written by Karen Gomm, a freelance journalist

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