If you are reading this article, there is every chance you are a trustee of a modern day pension scheme. As such you will be inundated with ever increasing Regulations, regular updates on changes to the pensions landscape, and are probably struggling with issues such as funding and investment in the hope of minimising the deficit (if you have a defined benefit scheme) or optimising the outcome for members at retirement (if you have a defined contribution scheme).
No matter which experts you have appointed to assist with the running of your pension scheme, the Pensions Regulator (tPR) states that a trustee is accountable for all scheme activities, even where these are delegated. This means that the trustees need to monitor and oversee how their scheme is run – with clarity of roles, responsibilities, decision-making, governance structures and processes, all of which should be clearly documented. In addition to all of this, it is necessary for the trustees to act in the best interest of all beneficiaries, ensuring good governance and delivering good outcomes.
The trustees can, and in our experience, do, work with a number of professionals to ensure compliance with the requirements set by tPR; indeed, it is a regulatory requirement to appoint certain key individuals such as the Scheme Actuary and Auditor. However, a non-mandatory role that we recommend trustees consider filling is that of the scheme secretary. The role of scheme secretary, as defined by tPR, is to work with the trustee board to make sure the scheme is efficiently and properly run, members’ benefits are secure and support efficient and effective governance. Where there is no scheme manager in place, the scheme secretary may also be expected to oversee day-to-day activities.
At Quantum we believe that the scheme secretary plays a crucial part in ensuring that a pension scheme is managed efficiently and effectively. Efficient operation of a pension scheme enables the trustees to focus on the important issues, leaving time at meetings for key decision making rather than more mundane administrative tasks. As a minimum, the secretarial service offered to trustee boards should incorporate the following:-
• Arranging meetings, preparing and issuing supporting packs, production of draft minutes, and following up on the action points.
• Maintaining and updating the risk register, preparing the annual budget and timetable and ensuring the conflicts of interest register is kept up to date.
• Overseeing the production of the annual report and accounts, member communications and regular maintenance of any trustee online repository.
• Arranging elections for member nominated trustees, and keeping a log of all trustee training undertaken.
The challenge faced by trustees is seeking out a service which delivers more than the basic and expected compliance functions mentioned above, which actively helps the trustees deal with the challenges the current environment places on them. The scope of service, cost and independence (or not) of the scheme secretary should also be considered.
The ideal candidate for the role of a modern day scheme secretary is likely to be a seasoned professional with the experience required to ensure all third parties appointed by the trustees are used effectively and appropriately. To be highly effective, the scheme secretary will have excellent organisation and project management skills which they can combine with specialist knowledge and extensive pensions experience. Potentially significant cost savings are one of the additional benefits that can be achieved as appointment of a scheme secretary should:-
• Save on internal time (trustees and sponsoring employer) which can be taken up with managing pension issues, or having to appoint external (and potentially expensive) consultants to deal with relatively straightforward matters. Experienced individuals fulfilling the role of scheme secretaries will have extensive technical knowledge enabling them to provide updates on regulatory changes and market developments as part of their role.
• Ensure that external advisers and suppliers are used in an efficient and appropriate way, and that all parties work for the good of the trustees, the scheme and the members. The scheme secretary should be happy to challenge advisers – albeit in a courteous and professional manner.
• Help with the development of a robust governance framework, which not only meets the regulations and fulfils tPR’s requirements, but also uses practical experience and industry knowledge to adopt best practice as a matter of course.
By appointing a good scheme secretary who has all the attributes mentioned above, the trustees can take comfort that whilst they remain responsible and accountable for all scheme activities, they do have a calm, supportive resource behind them keeping them on the straight and narrow.
Karen Kendall, Partner at Quantum
karen.kendall@quantumadvisory.co.uk