TPR professional trustee proposal ‘unworkable’

The Pensions Regulator’s (TPR) proposal to have a professional trustee on every board is currently “unworkable”, according to XPS Pensions principal Danny Vassiliades.

Vassiliades explained that pension schemes may find it difficult to find new trustees once this generation of trustees retire.

He said that having a professional trustee on every scheme board is “currently unachievable unless consolidation happens”, as there are so many small schemes in the UK and not enough new trustees.

In its consultation aiming to improve how schemes are run, the Future of Trusteeship and Governance, TPR asked industry members on whether a professional trustee should be required on every board.

A spokesperson for TPR said: “We believe all savers should be in well-run schemes that deliver good value.

“Our consultation outlines the problem of badly run pension schemes, considers how the trustee model can be made more effective and outlines proposals to reduce the number of poorly governed schemes

“It closes on 24 September and we look forward to receiving responses.”

However, Vassiliades does not believe the proposal is achievable in the current environment, and consolidation into fewer schemes needs to happen before it will be.

“Finding the next trustee is hard, and member-nominated trustees (MNT) are even harder to come by,” he added.

“Voluntary MNTs are less common than being asked to volunteer.”

One of the key reasons behind the lack of MNTs is that there is little to no incentive to be one.

Vassiliades said: “The personal liability risk puts people off and it is tough to give incentives”.

Society of Pension Professionals president, Paul McGlone, agreed that having a professional trustee on every board was unworkable.

He noted: “An obvious concern is cost. A recent Winmark survey revealed an average professional trustee chair costs £65,500 per annum.

“Thousands of new professional trustees, even at a lower cost, will add hundreds of £ms to scheme costs.”

McGlone also cited capacity as concern, as the proposal would either spread good professional trustees too thin or bad professional trustees will begin to emerge.

McGlone added: “There are many excellent boards without a professional trustee, and I question how adding a professional trustee will improve them.

“Those schemes could be faced with the ultimatum of a professional trustee as a by-product of TPR trying to improve the worst schemes. To me, that feels like the wrong outcome.”

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