Demand for professional trustees is expected to grow in the short term as defined benefit (DB) schemes grapple with regulatory change, although consolidation and a shrinking DB market could dampen opportunities over the longer term, according to Hymans Robertson.

In a recent blog, Hymans Robertson head of sole trustee services, Shani McKenzie, said conversations with professional trustees had revealed mixed views on how regulation and market direction will shape future demand.

She noted that policy and regulatory developments around DB endgame options were prompting many schemes to reassess their long-term objectives, with The Pensions Regulator (TPR) encouraging trustee boards that had changed their endgame to review whether their governance structures had the right experience and expertise.

As a result, many schemes were turning to professional trustees to help explore and implement both traditional and emerging endgame strategies, which are often complex.

McKenzie observed that professional trustee appointments had risen in recent years, with demand expected to remain strong as schemes seek specialist expertise for strategic decision-making.

Indeed, while schemes opting to run-on may retain a traditional trustee board, alternatives such as sole trusteeship and consolidation were increasingly being considered.

Therefore, she warned that trustees must weigh issues such as member representation, conflicts of interest, the flexibility of appointments, and long-term governance needs.

However, with relatively few schemes expected to run-on, the immediate impact on dominant governance models may be limited.

Meanwhile, demographic pressures were also found to be driving demand.

Data from the Department for Work & Pensions (DWP) suggested a significant wave of retirements from traditional trustee boards over the next three years, creating gaps that professional trustee firms - particularly those with career trustees - were well-placed to fill.

Views on this among firms were divided: some saw opportunity, while others pointed to strong competition and slower pipelines linked to cautious endgame planning.

Looking further ahead, McKenzie warned that consolidation could reduce the overall pool of schemes.

While only around 2 per cent of DB schemes currently wind up each year, faster wind-ups and sustained activity in the risk transfer market were expected to accelerate the sector’s decline.

Schemes approaching insurers may also spend longer preparing for buyout following buy-ins, while alternatives such as superfunds could reduce demand for standalone professional trustees.

Despite this, sentiment across the market remained mixed. Some firms were confident that demand would hold up, while others were concerned about the shrinking universe of DB schemes.

Overall, McKenzie suggested demand for professional trustees was likely to grow strongly in the short term, with fewer but potentially more valuable opportunities over the longer term.

As professional firms can govern multiple schemes, their market share is expected to increase, with sole trusteeship continuing to expand if the number of member-nominated trustees continues to fall.

To prepare for this future, McKenzie noted that firms were diversifying their offerings.

Some were positioning themselves for roles within consolidators, while others were extending their governance expertise into areas such as independent governance committees, outsourced pension management, and even services beyond pensions.

However, McKenzie said that commercial consolidation models could limit appointments due to conflicts of interest.

“As pension scheme outlooks become more complex and the opportunities for professional trustees broaden, so will the skills needed to capture them,” she added.

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