Majority of professional trustees to step down within three years

The majority (80 per cent) of professional defined benefit (DB) trustees plan to step down from their role within three years, research from Charles Stanley Fiduciary Management has found, prompting fears of a potential “trustee exodus”.

The number of professional trustees looking to step away from the role appears to be on the rise, as this marks an increase from the 62 per cent of pension trustees who planned to step down within three years in Charles Stanley’s inaugural research last year.

The research found that a “massive” 40 per cent of professional DB pension trustees plan to step down in 7-11 months, while a further 40 per cent plan to step down from their role in 1-3 years.

The final 10 per cent plan to step down from their role in 4-5 years, meaning that the average professional DB pension trustee expects to stand down in about 20 months.

Overly burdensome regulatory requirements were a key reason for many DB trustees planning to step down from the role, with 20 per stating that reporting requirements are too onerous to keep up with.

However, while 28 per cent stated that regulations are too burdensome, Charles Stanley pointed out that this is a significant reduction from the 56 per cent who attributed their exit to this last year.

Instead, an increased proportion of trustees are retiring (35 per cent) or reaching the end of their tenure (27 per cent).

In addition to this, 30 per cent cited health concerns and 28 per cent struggled with the transition to remote work, which Charles Stanley suggested could raise questions about how schemes can ensure they run an inclusive and accessible trustee board.

Commenting on the findings, Charles Stanley Fiduciary Management senior portfolio manager, Bob Campion, argued that it is "vital" that the industry take action now to address the underlying issues, and to attract and retain new talent.

He stated: “The volatility of recent months has shone a spotlight on how vital expertise and experience are in the management of pension funds.

"Professional trustees hold a critical position on the board as trusted and expert voices in deciding the best route for the scheme – from the asset allocation, to the payments of benefits – which has only become more entrenched as the landscape for DB schemes gets more complex.

“However, with a notable rise in the number of DB pension scheme trustees looking to step down from their tenure, pension schemes could swiftly find themselves in a sudden shortfall of professional oversight.

"It’s vital that the industry puts the work in now to find out what’s driving the move, and also try to attract and retain the required new influx of talent.

"The good news is that many professional trustee firms already have plans underway to recruit new professional trustees to the industry as it continues to evolve and navigate the changing economic landscape."

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