Covid-19 has ‘not made much impact' on most MNT’s pension scheme risks

Member-nominated trustees (MNTs) feel that most of the key risks facing their schemes have not been affected by the Covid-19 pandemic, according to the Association of Member Nominated Trustees (AMNT).

In a membership survey to mark its 10-year anniversary, conducted with XPS Pensions Group, the AMNT found that ‘no change’ was the most common response when asked how the risks of sponsor insolvency, exposure to inflation, demographic risks, members’ understanding and regulatory risks have changed since before the pandemic.

However, there were three risk factors that respondents felt had increased: investments falling in value, exposure to gilt yields and operational risks.

Although MNTs felt the pandemic had made little impact on scheme risks, 67 per cent said they had increased their allocation to lower-risk assets due to current volatility.

Covid-19 has affected the way some MNTs think they will operate going forward, with 42 per cent saying they planned to introduce virtual meeting to replace some face-to-face meeting in the longer term and 18 per cent said they would replace most face-to-face meetings with virtual ones.

When asked how they felt The Pensions Regulator had performed in its response to Covid-19, 7 per cent felt it was excellent, 43 per cent said it was good and 42 per cent felt it was adequate.

Five per cent said the regulator’s response had been slightly weak and 3 per cent felt it was poor.

The AMNT found that the average MNT had 12 years of experience and were knowledgeable in what a well-run scheme should look like.

The body warned that the current generation of MNTs could be hard to replace without positive action and noted that AMNT members are concentrated in a “declining” defined benefit scheme market.

“The results of the survey highlight the views of an experienced group of people, with an average length of service as a trustee of 12 years,” commented AMNY co-chair, David Weeks.

“They collectively represent about one third of the assets under management in UK pension funds. As such, they provide a valuable insight into current attitudes and experience and point to how things might develop in the future, particularly in relation to ESG and diversity issues.

“However, one thing highlighted by the results concerns me. The current generation of member nominated trustees may be hard to replace without positive action, certainly with people of the same calibre.

“Being a MNT is not an easy ride. It is not necessarily a well understood role and this may deter some potential recruits. We need to focus on this issue to ensure a strong supply of MNTs is available for the future.”

Nine in 10 respondents supported a further raising of the bar with the introduction of a compulsory qualification for all trustees.

The AMNT’s survey also found that ESG factors have assumed increased importance in decision making since its last survey in 2017, although the Covid-19 pandemic has not made much impact to this trend, with 18 per cent saying their focus on ESG had increased due to the pandemic.

Nearly all (98 per cent) MNTs had a long-term funding plan, with buyout still seen as the “gold standard”.

The association revealed that diversity remains an issue, with little diversity in either gender or age.

Nine out of 10 respondents were male and half were aged 65-74. Fifteen per cent were aged 75 or over, while 24 per cent were 55-64, 9 per cent were 45-54 and just 2 per cent were under the age of 45.

“The trustee role is a challenging one that is largely unpaid and with significant time commitment. 74 per cent spent 30 hours or more on formal trustee business each year, with 58 per cent spending a further 30 hours or more on background reading/ training,” added XPS head of governance, Rob Wallace.

“Despite this 90 per cent of respondents supported a further raising of the bar with a view that there should be a compulsory qualification for all trustees (with the majority favouring a formal requirement to complete the trustee toolkit). In my view the key challenge is keeping the flow of new MNTs and seeking to increase diversity.”

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