Confessions of an amateur trustee

Letter to a new trustee

This will be the last ‘Confessions of an Amateur Trustee’, under my byline at least, because I have decided to stand down as a member nominated trustee director of the Shell Contributory Pension Fund at the end of the year. My decision not to put my name forward for election again at the end of my four-year term was made not because I have not enjoyed the role – I have – but because I believe that anything I have not achieved in four years I am unlikely to achieve in eight! It’s time for somebody else to pick up the baton. That said I have become very interested in the whole complex subject of pensions during my years as a director (as those who elected me would no doubt have hoped!) and I will continue to play a role as a commentator in public on the subject. But how would I advise my successor on the board - whoever he or she is? Well, some bits of advice will need to be confidential as they relate to the specifics of the board on which the new trustee will sit. That will be done ‘off the record’ over a glass of Montrachet! But some things are more general in character and may be of interest to new trustees of any defined benefit pension fund. So here, for what they are worth, they are. My ‘letter to a new trustee’.

Dear trustee-elect,

Congratulations. You have persuaded your electorate that you are the best among many good candidates and you now have four years to make a difference. I am assuming, of course, that you do want to ‘make a difference’ and that you are not turning up just to make up the numbers! You may feel that you have some unique knowledge set that the board currently lacks and that you personally will be a crucial piece in the jigsaw that will materially help its effectiveness. Well, to be honest I think that is unlikely – if you are joining a large and well-established board that is. The skill-set that such a board already has either within its numbers or readily on tap is likely to be formidable. There will be people around you who have been trustees for a very long time and over that time they will have experienced most of the events that you could expect to see during your term. Similarly among the professional advisers available to the board will be some very knowledgeable people indeed. Their knowledge is tested daily, and not just by the trustees of your fund, and you probably won’t catch them out on anything!

But although the key areas of pension fund management are likely to be covered by investment advisers, actuaries and the rest augmented by the experienced lay trustees who’ve seen it all before, does this really mean that what you know can’t help? Not at all - but in my experience that knowledge is likely to be best applied to the more peripheral areas of trusteeship. However smart and informed you feel you are on investment as a result of having managed your personal investment portfolio, it’s unlikely that the knowledge you have gained doing this will really make much of a difference in a billion-pound fund’s investment strategy decision-making (although you will probably know the investment jargon, which at least is some help). No, it’s more likely to be in the non-core areas that your knowledge will be applicable. In my case it was communications - a subject in which I specialised for much of the latter part of my Shell career. All pension funds have a statuary duty to communicate with their members but how they do this is pretty much up to them (so long as the key facts about the status of the fund are disseminated annually to members). This subject has a fairly high profile in the fund of which I was a director but generally across the industry it is a bit of an ‘also-ran’ as a matter for trustee involvement.

Communications was rarely on the agenda at the NAPF conferences I attended (except for DC schemes keen to enrol members that is, which is another story). The NAPF has no monitor of DB scheme member communications and runs no training on the subject. With the rapid move to electronic communications there is a huge opportunity to improve communications with and perhaps between members so if you are a website expert or otherwise knowledgeable on the subject you may well have a role to play.

Linked with communications is the subject of relationship management. I would put this very high on my list of topics if I was a new trustee. Ask questions about how your fund relates to its members. This goes beyond ‘top-down’ communications and suggests that a two-way relationship between members and the fund is desirable. Obviously for actives this is particularly important. Does your fund have an online facility which allows an active member to check his or her personal pension position at any time? Can the members do ‘what if’ calculations in real time and get answers to any questions they may have? For deferred members and pensioners the needs are somewhat less but that doesn’t mean that a personal relationship between fund and members for these member classes is undesirable or difficult. For example as a pensioner I might like to be able to call up the details of my pension in payment at any time and, in particular, to find out (for example) instantly and personally what the pension situation would be for my spouse in the event of my demise.

So you may well know some things that others on your board do not know and if they are relevant don’t be shy! At the very least you can’t do any damage and who knows your knowledge might just make a difference. But really it’s how you approach the trustee role rather than what knowledge you bring to it that is really the key to how effective you will be. Any communal activity where two or three or more gather together to do things needs a personality mix. On any board, and certainly on the one of which I’ve been a member, there are strong silent types and rather noisier contributors. Readers will probably guess that I fell into the latter and they would be right! Obviously we all have to be true to our own personality and I am not arguing that either the quieter or the noisier members are more effective. And I’m sure that I would hate to be involved in a trustee board of clones, whether they are quiet ones or loud ones!

The propensity to challenge is I think required of all trustees – whether they do it by jumping up and down a bit or more subtly! What you do when you challenge is to confront power, whether it be ‘position power’ or ‘expert power’ – perhaps the two most common forms of power that a trustee will encounter. Position power is particularly present with the fund sponsor – they ultimately hold the purse strings and this can be a bit daunting to challenge! Similarly ‘expert power’ - the lawyers, the actuaries, and the investment gurus (etc) is intimidating sometimes. During my four years as a trustee our experts were challenged by me or others from time to time and wouldn’t you know – they weren’t always right (though mostly they were!).

I wish you well as a pension fund trustee. The journey will take you down some unexpected roads and probably a few cul-de-sacs. But it’s hugely rewarding. Can you make a difference? You’ve got to believe it! Good luck.

Paddy Briggs is a member nominated trustee director of the Shell Contributory Pension Fund. He writes in a personal capacity and the views he expresses are his own.

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