Industry experts have shared mixed views in response to the government's call for evidence on trustee knowledge and capability, with concerns that too many requirements could present recruitment or resourcing issues, particularly for smaller schemes.

The government previously launched a call for evidence around trustee capability and the barriers to trustees doing their job in a way which is effective, as part of the Mansion House reforms.

Responding to the call for evidence, the Association of Professional Pension Trustees (APPT) agreed that mandatory professional accreditation would help enhance framework and boots governance standards.

In addition to this, it also backed the planned overhaul of The Pension Regulator’s Trustee Toolkit, or whatever replaces it, as the recognised source of minimum required trustee knowledge and understanding.

However, the association argued that broader accreditation proposals could require more careful thought, warning that an accreditation requirement could make the recruitment of lay trustees becomes even more difficult than it can be at present for many schemes.

It also said that, before further administrative requirements are added for lay trustees beyond those already required in the regulator's scheme return document there needs to be careful consideration as to the purpose of such a register of trustees, what use it is intended to be put and how this will improve the protection of members’ benefits.

APPT Chair, Harus Rai, commented: “Amongst accredited Professional trustees we believe that trustee requirements are well understood, and Professional trustees recognise that they are held to a higher standard of care.

“Our understanding is that very few lay trustees have chosen to accredit under the voluntary accreditation framework set up in 2021.

"The broad range of skills, qualifications, and experience of lay trustees, together in many cases with their first-hand knowledge of the businesses that sponsor pension schemes, is a vast resource that has underpinned the good governance of most UK trust-based schemes over the last century and beyond and should not be under-estimated.”

Hymans Robertson partner and governance consulting lead, Laura Andrikopoulos, also raised concerns over the proposals, raising particular reservations about the idea of a register of all trustees.

"TPR would need to be very clear about how this register would be used," she continued.

"It could have the effect of driving lay trustees out of their roles to avoid such registration unless it was very clear how this information would be used by TPR. However, a register of all trustees could help to ensure lay trustees feel as valued as professional trustees.

“We don’t support the idea of requiring schemes to have a certain proportion of accredited trustees. This requirement could be quite onerous on the smaller schemes, due to the range of pension schemes, including a large number of very small schemes.”

LCP also warned that accreditation shouldn’t be a “tick box” exercise, instead arguing that any strengthening of the current accreditation schemes would need to be at a pace that could be supported by the trustee community naturally rather than rushed through.

However, LCP suggested that changes to the trustee landscape may be needed to support the government's broader proposals, arguing that investment opportunities can only be maximised if trustees have the right regulatory framework and guidance to support making decisions to invest in productive assets.

In its response, LCP said it does not believe that trustees’ knowledge and understanding is a barrier to investing in complex assets such as illiquids, but rather the current regulatory framework and definition of fiduciary duty may be acting as a barrier.

Instead, LCP called for new regulations that create a different risk/reward environment for DB trustees that, in turn, can be expected to support more widespread, and for longer, DB investment in productive finance.

Key to doing this, according to the firm, would be to undertake a wider review of fiduciary duty to enable trustees to look beyond scheme membership to the members’ best interests over their lifetime and to allow trustees to consider the macro impact of their investment decisions in terms of the energy transition and climate change.

LCP partner, Nathalie Sims, stated: “Trustees know what they are doing. This consultation is a great opportunity to review the current regulatory framework and support provided for trustees to make the best decisions for the future of their members.

"The rapid growth of the professional trustee industry is a testament to how much demand there is to have additional support on trustee boards within the investment industry and beyond, and this growth is likely going to continue.”

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