The updated Defined Benefit (DB) Funding Code gives trustees a valuable opportunity to rethink their investment governance and focus more strategically on their scheme’s long-term objectives, Russell Investments fiduciary manager and client CIO, Aqib Merchant, has said.

Speaking at the Association of Member Nominated Trustees (AMNT) Annual Conference, Merchant said the new regime should prompt trustee boards to reassess how their time and resources are allocated as they move towards endgame.

“Endgame objectives and the DB Funding Code go hand in hand, but it’s important that trustee boards use this as an opportunity to think about what their governance structure looks like,” he said.

Merchant pointed to Russell Investments data, which showed that trustee boards currently spend only around 10 per cent of their time making strategic decisions and tracking progress, compared to 25 per cent on regulatory compliance, 25 per cent on operational tasks, and 40 per cent on investment management selection and monitoring.

“Unfortunately, the thing which matters most - strategic endgame decisions - often only gets discussed once every three years,” he warned.

“This is what needs to change as an industry: more focus on governance and where schemes are headed as part of their endgame.”

Merchant argued that increasing regulatory complexity could, in fact, help trustees by encouraging them to delegate more effectively and concentrate their efforts where they can make the greatest impact.

“This is where delegation can add real value for schemes,” he said, stressing that “it means you can spend the bulk of your time on strategic decisions.”

With this in mind, he suggested that an improved governance model under the updated code would allocate up to 40 per cent of trustee time to strategic decisions and tracking progress, with just 10 per cent focused on investment selection and monitoring.

Introduced in September 2024, the DB Funding Code was described as one of the most significant developments for pension schemes since the 2005 Pensions Act.

However, more than a year on, many trustees are still adapting to the new requirements.

Indeed, a recent poll at an LCP webinar found that almost three-quarters (74 per cent) of trustees believed there was still more they needed to understand about the regime.

Echoing Merchant’s comments, Hymans Robertson recently warned that the new framework represented a “fundamental shift” for schemes.

In its latest report, Excellence in Endgames: From Vision to Valuation - Why Your Endgame Sets the Course, the consultancy said that under the funding code, trustees and sponsors must align funding and investment decisions with a clear endgame plan, and formally document how this supports their overall strategy as part of their next valuation.

Hymans Robertson urged schemes to take time ahead of their next valuation cycle to agree on long-term objectives that were both compliant and reflective of their true ambitions.

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