Sweeping legislation and tough economic conditions has increased trustees’ responsibilities and put pressure on the level of training required in order for them to be able to effectively discharge their duties.

Lack of training

But, according to the Mercer 2013 Pensions Governance Survey, just over half of all schemes require trustees to have completed the TPR Trustee Toolkit. It calls this “a surprising and disappointing statistic given The Pensions Regulator’s focus on this and the pressing need to have competent trustees making effective decisions”.

“Whilst there are a lot of good and qualified trustees, the survey shows that there are also a significant number of people not being trained, and that is really worrying,” offers Mercer principal Mark Wilkinson. “Trustees are supposed to be looking after the financial health of a scheme and yet training is patchy. The regulator’s Trustee Toolkit is a good and free resource, and should be done as a bare minimum.”

The Association of Member Nominated Trustees (AMNT) co-chair Barry Parr agrees. He says the TPR Toolkit is the “bedrock of trustee training” and believes it should be completed within six months of becoming a trustee.

Seeing as it covers those areas which, in strict terms, are a statutory requirement for trustees, Pensions Management Institute technical director Tim Middleton says it would seem that all trustees would want to aspire to achieve at least that basic standard considering the enormity of what is expected of them. Instead far too many are “sleepwalking”.

Middleton says the standard of trustees ranges greatly. “The most professional ones sit at the tip of a pyramid. As you work your way down there are far too many trustee boards who do not understand what they are doing and are over reliant on their professional advisers.”

Mercer’s 2013 study also found a low level of confidence among trustees in making decisions. This was especially with regard to the financial management of the scheme (funding, investment, and sponsor covenant). In its opinion, the most common reason for lack of confidence is gaps in the board’s skills and knowledge, which it says suggests a general need for increased training and development.

It states: “The role of trustee requires an ever-increasing amount of specialist knowledge... We wonder if some boards may be relying too much on advisers to make decisions, without making themselves sufficiently familiar with the issues or challenging the advice given.”

Courses available

Last year the consulting firm looked at the courses it was offering afresh. It noted that training in the wider marketplace used to be perceived as fairly dry and concluded many trustees were not enthused to attend. Consequently, it decided it would not try to teach all the technical details but rather give trustees some real life scenarios and discuss concepts, processes and decision-making so that they have the confidence to handle complex situations. It now does this through its two one-day DB modules, and one-day DC module. For the DB course, a case study runs through both days with real life client scenarios that can happen through the life cycle of a scheme. The DC course does the same through the life cycle of a member. As well as funding, investment and covenant, the DB course also covers governance and administration, and how bad news needs to be factored into decision-making. “It is about having a plan and having the confidence to ask the right questions,” notes Wilkinson. “It is not about information overload as you are never going to know everything there is to know.”

The NAPF says it is important for trustees to ensure they are familiar with any changes in regulation or legislation, as well as keep sight of their core responsibilities. These relate primarily to governance of the scheme and the oversight of any party to whom activities are delegated. Therefore any training must have a practical application to the duties of a trustee to ensure they perform their role effectively and provide good outcomes for their scheme members.

The NAPF Academy uses a structured learning environment tailored specifically for pension scheme trustees. Its training programme, which is reviewed regularly, is practice-based and has clear objectives and outcomes. “We understand the limited time many trustees have for training and the variety of experience, abilities and learning preferences that trustees have so we have designed our training programmes to match a range of needs,” offers NAPF educational development manager Frances Corbett.

It focuses first on what trustees must know and do before adding any ‘nice to know’ information. “And our aim is to ensure that once the trustee has completed our training they can clearly identify what they have learned and how the training has met the objectives set out at the start.”

Its trustee faculty focuses on how to apply knowledge to practical day-to-day trustee decisions and practice. One example of this is its employer covenant course, which uses case studies and examples to ensure delegates gain a comprehensive insight into the process of reviewing the employer covenant and what is involved when assessing it at both the triennial valuation and when a corporate restructuring or refinancing occurs.

“While there are professional covenant assessors who need a vast array of technical knowledge, our course helps trustees identify the specific areas on which they should concentrate when carrying out a review, without requiring them to become technical experts on the subject,” explains Corbett.

It also provides an ongoing programme of events to raise awareness of new issues, such as the dedicated trustee learning zones at NAPF conferences, hot topic seminars and an annual trustee conference.

To encourage the raising of standards, the PMI offers a formal qualification in trusteeship called Awards in Pensions Trusteeship. One is for all types of pension schemes and the other is just for DC schemes. The syllabus very closely covers The Pension Regulator’s TKU requirements – so that trustees can comply with the 2004 Pensions Act.

The all-scheme qualification is a 90 minute, 90 question multiple choice exam. The DC version is a 60 minute, 60 question multiple choice exam. The institute is now having discussions with the Association of Professional Trustees about a further qualification for trustees at a more advanced level.

The PMI also recently launched a CPD scheme (continuing professional development), based on trustee boards’ own internal trustee training programmes. It encourages boards to sign up to its trustee group. They then become eligible to participate in voluntary CPD schemes which, it says, ensures trustees are doing “serious ongoing training”.

In light of so much policy change, Middleton says its two one-day technical seminars per year are good for enabling trustees to keep up to date. Its latest seminars will cover many issues arising from the Budget, such as design of default funds, as well as issues affecting DB schemes. It will also look at issues relating to the guidance guarantee, such as of what it will consist and how it is best addressed.

Parr encourages trustees to have specific training run by the trust schemes themselves. There are also “an extensive set of training opportunities/learning seminars/webinars” on all trustee topics, but particularly the most recent ‘hot’ subjects. Many of these sessions are free of charge for trustees.

When the new AMNT website goes live this month there will be an ‘events calendar’, which will allow direct registration for some of the many events being offered monthly. Coupled with this, Parr promotes the widespread reading of pensions journals for topical and study pieces. He also advises trustees to access interactive and blogging sites which, he believes, “encourage more dynamic approaches to fluid policy developments”.

Nadine Wojakovski is a freelance journalist

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