Professional trustee appointments have grown by 8 per cent over the past year to reach 2,711, according to WTW research, representing a slowdown from the 11 per cent growth recorded the previous year.

The research showed that this is expected to slow to around 5 per cent over the next three years, primarily due to a maturing market and schemes seeing accelerated buyout and wind-up timescales due to improved funding levels.

“The professional trustee market is still growing at a very healthy rate,” WTW's professional trustee group director, Mustafa Bharmal, said.

“Following a flurry of professional trustee appointments over the past few years, rates of growth have started to stabilise as around half of all defined benefit (DB) pension schemes now have a professional trustee in place.”

Sole trustee appointments also saw an 8 per cent growth in overall appointments this past year, although this is lower than the 14 per cent growth observed the previous year.

The research found that sole trustees currently account for approximately 50 per cent of total professional trustee appointments, focusing primarily on small schemes, representing almost 70 per cent of appointments to schemes with assets under £25m.

Bharmal said that appointing professional trustees to prepare a scheme for settlement is becoming “increasingly common”, especially as smaller pension schemes sometimes transition to a sole trustee model as they approach buyout.

Meanwhile, for large schemes with assets over £1bn, 94 per cent of professional trustee appointments have been to a trustee board, either as a co-trustee (58 per cent) or trustee chair (36 per cent).

WTW said that as smaller schemes shift from a board model to a sole trustee setup (often as they approach buy-in or buyout), the importance of knowledge transfer and effective communication between the sponsor and the outgoing board and incoming sole trustee is seen as the most important factors in a successful transition.

“However, trustees warn that sudden cliff-edge transitions from a board to a sole trustee are to be avoided due to the importance of knowledge transfer and communication between the sponsor, the outgoing board and the incoming sole trustee,” he said.

The research also revealed that 89 per cent of professional trustee firms believe that the most important priority for DB pension schemes when appointing a professional trustee is the journey to settlement or endgame planning.

Meanwhile, 74 per cent said it was to enhance the specialist expertise of the trustee board, and 47 per cent said it was to address difficulties with finding trustees or succession planning.

WTW said this research is “increasingly relevant” with The Pensions Regulator (TPR) annual funding statement estimated that 54 per cent of schemes are in surplus on a buyout basis.

Additionally, the report suggested that this had an impact on the net growth in professional trustee appointments as the increased number of full de-risking buyouts in the past year drove higher rates of professional trustee appointment exits, as schemes transitioned away from a trustee-board to an insurance company.

It also found that the range of roles for professional trustees is expanding from purely DB scheme appointments, with the survey showing that 5 per cent of professional trustee appointments were to defined contribution (DC) own trusts.

WTW also noted that professional trustees have recently been appointed in the superfund market and the first collective DC (CDC) scheme.

Bharmal explained that professional trustee backgrounds are “broadening”, reflected in the range of professions that professional trustee firms are recruiting from, such as human resources, legal, general finance and business expertise.

He also said professional trustees are also recruiting career trustees as well as those in traditional actuarial and consultancy backgrounds.

WTW stated that this "significant" growth and change in the professional trustee market over recent years has also encouraged TPR to evaluate the importance of professional trustees, as it recently announced extended market oversight and engagement with professional trustee firms.

TPR chief executive officer, Nausicaa Delfas, said: “We welcome the valuable insight and perspectives provided by this and other surveys in a fast-changing pensions market. 

“Professional trusteeship has experienced huge growth over the last few years, bringing new risks and opportunities.

“We expect all new appointments to have followed a robust process, and to protect savers, we have extended our market oversight approach to the 11 largest firms.”

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