One in seven trust-based schemes have trustee boards where nobody meet the Pensions Regulator’s minimum standards of knowledge.
Research carried out by TPR has found 15 per cent of schemes have not heard of the regulator’s Trustee Knowledge and Understanding (TKU) code of practice. Just half of schemes report that all trustees meet the minimum standards for knowledge.
Schemes with only professional trustees were more likely to be well run in areas such as their ability to assess the value for money of investment advisers. Small schemes were less able to afford advisers and were less able to challenge their advice. Overall the majority of trustees rarely disagreed with their advisers.
Schemes used for automatic enrolment were more engaged with scheme governance and offered more formal training to trustees. The regulator says it supports this trend, which it says is in line with its recommendation to small employers preparing for automatic enrolment to choose a high quality large scheme such as a multi-employer master trust or a group personal pension (GPP).
The research found 69 per cent of lay trustees on trustee boards in large schemes claimed to meet the standards set out in the regulator’s TKU code of practice. Among small schemes only 38 per cent of lay trustees reported that they meet this standard, and 51 per cent in medium schemes.
On average, the amount of time spent by a trustee on their duties is nine days for small schemes, 12 days for medium schemes and 16 days for large schemes, the survey found. But around half of small scheme trustees spend less than five days on their duties.
DC schemes spend less time on trustee duties and their non-professional or lay trustees are less likely to have a level of knowledge and understanding that meets the standards set out in the TKU code than those in DB schemes.
The greatest knowledge gap identified by trustees – the disparity between what they felt they needed to know and what they actually knew – was around pensions investment.
The lowest knowledge score overall was for knowledge of pensions law.
Trustees reported their lowest levels of confidence related to the ability to assess the value for money of their external advice and services.
A total of 816 interviews were completed with trustees of DB, DC and hybrid schemes with 12 or more members, including schemes that were open, closed to new members, paid up and winding up.
The Pensions Regulator chief executive Lesley Titcomb says: “As we and the industry work to create better outcomes in later life for workplace savers, it is only right that we increase our focus on the competency and capability of trustees and the structure of trustee boards.
“All trustees, some of whom are lay people with very little pensions experience, are required to do an increasingly complicated job, and so we are asking how we can further support trustees in fulfilling their important role.
“Our latest research gives us a better understanding of the competence of trustees and their own perception of the areas in which they need to develop their skills and knowledge. While many are doing a good job, there are some concerning findings, such as gaps in investment knowledge and the confidence to apply such knowledge, so we need to do more work to decide how best to address this.
“I want to have an open debate with the industry about what we all think an effective 21st Century trustee should look like, and how we get there.”