Why member nominated trustees are as important as ever

I recently announced that I will shortly be stepping down as founding co-chair of the Association of Member Nominated Trustees (AMNT).  

During the 15 years since I co-founded the organisation, the voice of member-nominated trustees has been heard – and listened to – by regulators and government on a range of issues that are vital for the retirement prospects of ordinary working people.  

We have made a difference and I am extremely proud of that. 

Trustees will no doubt feel that the last few years have been difficult – but with the tectonic political shifts in motion globally, the next few years are likely to present new challenges. 

Whatever lies ahead there is one key objective above all others. That is to ensure that when members or policyholders retire, they have enough money to live a decent life. 

I continue to support the conclusions of the 2004 Pensions Commission, which stated that people on average incomes need to be receive about two-thirds of their final pay. Every policy should be interrogated as to how it will help to achieve this. 

Ensuring member security

Looking ahead, there are a number of issues I feel must be progressed. 

I believe that multi-employer collective defined contribution (CDC) schemes have the potential to be a gamechanger. We have urged the government to ensure that, when the Value for Money requirements are introduced, the new multi-employer CDC system will be ready to accept transfers in. 

It is now widely recognised that savers in CDC could retire with a pension 30% to 50% bigger than those in ordinary defined contribution schemes for the same contributions. 

Additionally, the government must address with urgency the plight of the millions working in insecure employment – in the gig economy, the self-employed, freelance, or casual workers – many of whom have hardly any pension provision at all.  

We have stated our view that ways must be found to enable them to access the superior returns of CDC schemes, and to gain pension contributions from those employing them. 

The importance of environmental and social considerations

Turning to the wider world in which we live, stewardship is bursting onto the frontline following the re-election of Donald Trump. He has urged US oil companies to extract as much oil as they can and denounced diversity and inclusion programmes. 

The contagion is spreading to the UK, where some companies wanting US contracts have started to ditch diversity and inclusion policies. 

Lest we forget, environmental, social and governance policies aren’t fluffy ‘nice to have’ options. They are hard-nosed business issues that aim to reduce financial risk to a pension scheme’s assets. 

Policies that push for greater diversity among staff are there because companies should be hiring the best workers drawn from the biggest pool of labour. Policies on climate change are there because the settled view of scientists is that failure to reduce global warming will be catastrophic for people and businesses everywhere. 

Trusteeship and stewardship

Given these threats, it is even more important that UK trustees continue to assert their right to direct how the shareholder votes associated with their assets are cast by fund managers – particularly in pooled funds. 

The AMNT has battled for more than 10 years to take this forward, and asset owners received support from the Financial Reporting Council (FRC) in its 2020 Stewardship Code, which required managers to explain “how assets have been managed in alignment with clients’ stewardship and investment policies” and “how they have taken account of the views of clients and what actions they have taken as a result”. 

It is disgraceful that, in its proposed 2024 code, the FRC has proposed downgrading the treatment of pension trustees, with all their legal responsibilities, to be on a par with the treatment of ordinary pension scheme members who have none. 

The two elements of the code set out above have been eliminated and instead fund managers merely have to describe how they “maintain a dialogue with clients and/or beneficiaries”. We believe that the proposed new code, if unamended, will undermine the Pensions Regulator’s (TPR) guidance. 

Schroders has called for a ‘taboo conversation’ on getting rid of the UK Stewardship Code. 

We disagree on the idea of dropping the Stewardship Code, but if the code gives no assistance whatsoever to smaller asset owners, then it will make one question what the point is. Particularly when it is completely at odds with TPR statements to trustees that “it is not enough for trustees to report that they have delegated these matters to asset managers”. 

We must ensure that the voices of member nominated trustees continue to be heard.  

The government appears to be taking no action on the growth of sole trusteeship, which gives no voice to members. Additionally, some sole trustee companies seem to be offering further services to a pension scheme in addition to their trusteeship. 

I would be interested to know whether a sole trustee company is prepared to sack itself if those extra services turn out to be substandard? 

Whatever happens in the next few years, with pension consolidation and hopefully the introduction of multi-employer CDC, member nominated trustees must remain. They must be a part of every pension scheme board. 

As the only board members whose sole interest is the welfare of ordinary pension savers, member nominated trustees have to be there.   

Janice Turner is the outgoing co-chair of of the Association of Member Nominated Trustees.