PLSA AC 21: Greater long-term DB succession planning called for

Defined benefit (DB) master trusts could present a solution to concerns over a lack of succession planning on DB pension boards, according to TPT Retirement Solutions national development manager, Jonathan Jackaman.

Speaking at the Pensions and Lifetime Savings Association (PLSA) Annual Conference, Jackaman warned that there is a question as to how many pension boards actually have a succession plan in place and how succession planning in this role is dealt with.

"Where do you find the right people who've got those right skills who are willing to do it, especially with considerable responsibilities and challenges... who actually have the time to do the role?" he queried.

Jackaman continued: "There are lots of challenges and issues facing schemes and if you've got a governance void, which not having the right succession planning would lead to, that could lead to problems for the scheme such as poor decision making, and maybe taking too long to make those key decisions as well.

"It's a complex role being a trustee, and it's really important that a scheme has got the right people looking after it.

"If you think about the fact that schemes will be in existence for a long time, by which time most of those are probably all of the current trustees will have retired from the roles, it's going to be a problem, especially with the struggle to find new trustees as schemes are more legacy now.

"It does mean there needs to be a more of a long-term consideration as to what is the right framework for future governance and scheme.

"It seems to be one of the anomalies of running a pension scheme that a lot of the work, considerations and discussions are all about the long-term future of the scheme, but when it comes to governance it does seems quite short-term outlook."

In light of these concerns, Jackaman noted that DB master trusts can provide "enhanced governance", as they are able to take on the trusteeship and "take all that hassle and governance away from trustees and sponsors".

Furthermore, whilst he recognised that a lot of trustees enjoy their job, and will have likely devoted significant time and energy, he warned that the " challenges and the new world that we're in, the increasing pressures that are subject and the prospect of more regulation future, means it probably is time for them to consider passing on responsibility".

Further barriers to the adoption of DB master trusts still remain, however, as Jackaman warned that concerns over vested interest are "probably the biggest challenge".

He said: "The DB world is dominated by advisors, and obviously we can't ignore the fact that whilst advisers are always required, if a scheme moves to master trust, a significant elements of their fee will be replaced by that master trust.

"That's detrimental to their fee income, which honestly, that's probably the biggest challenge that we face in markets when talking to people."

Jackaman noted that there are areas where specialist work and advisors are needed, such as in the case of distressed schemes, where it is "unlikely that DB master trusts will be the right fit".

"However, for the vast majority of DB schemes, a DB master trust can be a good solution and certainly worth considering," he concluded.

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