Corporate sole trusteeship of defined benefit (DB) pension schemes has continued to grow, with appointments increasing by 12 per cent in the year to March 2023, analysis from Hymans Robertson has revealed.

Its report noted that the factors behind the continued growth include cost, a decline in member-nominated trustees (MNT), a reduction in company management time, and the search for efficient governance and decision making.

However, it also warned that issues recruiting trustees with the right backgrounds and the demands of highly efficient service delivery could challenge the sole trusteeship model.

Corporate sole trustees now make up around a third of professional trustee appointments, while the number of MNTs has fallen by 53 per cent over the five years to March 2023, from 4,858 to 2,284.

Eight in 10 (80 per cent) corporate sole trustee schemes were smaller than £50m, while 2 per cent were greater than £1bn.

Corporate sole trustee schemes made up 25-30 per cent of the risk transfer market up to 31 March 2023, according to Hymans Robertson, while professional trustees estimated that 40 per cent of sole trustee schemes might buyout in the next five years.

Furthermore, the report forecast that corporate sole trustee appointments of DB schemes could double in the next five years.

Hymans Robertson’s report also looked at the role of governance and decision making in driving growth in the sole trustee market, and highlighted that improvements in these two areas can reduce costs and lead to better member outcomes and, due to their expertise and ability, professional corporate trustees are often appointed.

Commenting on the findings, Hymans Robertson head of sole trustee services, Shani McKenzie, said: “The sector has grown by 12 per cent despite a demanding year for trustees, particularly in responding to yield rises and reviewing their investment portfolios.

“Their investment skills and knowledge would have been put to the test, so many schemes looked to professional trustees who have experience in strategy reviews and investment solutions.

“We may see the response to the call for evidence into trustee skills throw further momentum behind trustee boards’ search for professionalism, including through corporate sole trustees.

“Growth will only continue to be achieved if trustees focus on diversifying resourcing solutions, as the pool of those with pensions experience is finite. Over the next few years, the impact of this may also mean that efficient operating models are paramount.”

McKenzie also highlighted some of the challenges facing the corporate sole trustee market, noting that, following the recent market volatility, the needs of schemes have evolved.

“Many now find themselves closer to buyout or needing to consider other endgame options and the skills and experience that corporate sole trustees have here are highly sought after,” she stated.

“Corporate sole trustees played a central role in risk transfer deals in the year to March 2023, representing more than one in four transactions. This is double the corporate sole trustees’ current presence in the DB universe.

“Our report concludes that these exercises have not placed strains on the time corporate sole trustees have available and that they bring several benefits to the broking process, albeit there are still wider obstacles to navigating this busy market.

“As with last year, governance is a central theme for the corporate sole trustee sector and 80 per cent of the largest firms are taking steps to create efficiencies and standardisation in their approach to harmonise governance across their portfolio.

“The model can give rise to concerns in this area. Two of the most vocalised issues are diversity and independence. These challenges could be managed by ensuring sufficient attention is paid to having effective systems of governance in place and adhering to professional codes of practice.”

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