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EduPension - Trustee Training

Whether you are a member nominated or employer nominated trustee of a private sector pension fund, or an elected member or appointed representative in a local government (LGPS) pension fund, the statutory and regulatory requirements placed on you are quite similar in principle if not in detail. In essence if not in law, you are all 'trustees' and increasingly pressure is being put upon you to better understand the investment decisions you are required to take.

As a result and in response to a rapidly changing economic environment, 'trustees' are demanding more extensive and formal training to evidence their development. At EduPension we provide a variety of courses to address a wide range of topics, from investment strategy and cost saving initiatives, to the core technical requirements.

Effective decision-making

Myners Principle No.1 as the basis of best practice states that 'trustees' should ensure that decisions are taken by persons with the skills, knowledge, advice and resources necessary, and that 'trustees' should have sufficient expertise to be able to evaluate and challenge the advice they receive. Collectively, 'trustees' should be able to identify conflicts of interest and manage them effectively.

Investment structures are becoming increasingly sophisticated, such as liability driven investment, buy-ins, buy-outs, derivatives trading, and 'trustees' also face the relatively new responsibility of reviewing their investment advisers every few years. Just taking advice is not enough - that advice needs to be reviewed, understood and tested as to value for money and effectiveness.

The Knowledge Framework

Under the terms of the Pensions Act 2004, trustees are expected to be familiar with the laws relating to pension schemes and trusts, and the documents governing their own scheme, and understand the principles behind funding and investment. These principles are applied in a similar way to LGPS funds through detailed regulation and guidance.

The Pensions Regulator for the private sector and the Department for Communities and Local Government for LGPS, have each issued guidance in the form of an on-line toolkit for the former and a CIPFA framework for the latter - these provide a significant resource to 'trustees'. But are they enough?

These represent the fundamental building blocks for a programme of learning, the basics of what 'trustees' need to know. This is not a one-off exercise but a progressive acquisition of skills. Effective training must be adaptive to needs.

New 'trustees' are being appointed all the time and need familiarisation training. With U.K local elections coming up, newly elected representatives may require additional training.

In addition, the investment markets are becoming more complex and specialist training beyond the 'basics' is often required.

TPR Trustee Toolkit

  • Trust law
  • Pensions law
  • Investments and risk
  • Funding - DB
  • Contributions - DB
  • Strategic asset allocation
  • Funding - DC/AVCs
  • Investment choices - DC/AVCs
  • Fund management
  • Trust deed and rules
  • SIPs and SFPs

CIPFA Framework

  • Pensions legislation and governance context
  • Pension accounting and auditing standards
  • Financial services procurement and relationship management
  • Investment performance and risk management
  • Financial markets and products knowledge
  • Actuarial methods, standards and practices

Change is challenging

TPR are in the process of updating the Trustee Toolkit and changes in the Regulator's perspective on funding are being suggested by Central Government. This will impact on the advice that actuaries give, already complicated, and impact similarly on the LGPS sector.

New public sector legislation is coming in which will not only change the Scheme rules but also introduce further changes to the governance structure of LGPS funds, further increasing the need for training.

All change is challenging but the accountability of 'trustees' and the duties placed upon them are increasingly onerous. Greater knowledge and understanding is required and training is the essential tool.

Putting purpose into training

The aim of the training is to provide 'trustees, with the knowledge and confidence to challenge the information and advice they are given and not be solely reliant on the views of their consultants and advisers; this will allow trustees to make more effective and rational decisions. But this is not just a 'tick box' process to satisfy the regulators. 'Trustees' should identify their particular needs and concerns, and the issues that relate to their particular fund and decision-making processes.

EduPension can assist the funds in identifying their particular training needs and deliver a comprehensive educational programme so that 'trustees' are in compliance with their responsibilities. It is becoming increasingly important for funds to include in their Annual Reports and Accounts details of the knowledge and skills development undertaken by 'trustees' to provide a form of comfort to its scheme members.

Bespoke Solutions

One decision in training is whether to undertake a programme with the scheme's own advisers, or to look elsewhere for a fresh perspective. Your own advisers will already be familiar with the scheme's profile and will tailor the programme content to cover issues pertinent to the individual scheme.

But arguably 'trustees' have a duty under the Regulator's direction to robustly question their advisers' recommendations, and obtaining a different slant on issues is a healthy practice that will add a new dimension through learning of the experiences of others.

Some issues require bespoke solutions, however. For example, 'trustees' need to understand how the pension scheme funding and risk strategy fits in the wider context of the sponsoring employer's business, and in the case of LGPS funds, cost sharing arrangements and tax raising capacity.

Training outside the box

At Edupension, we not only recognise the formal training that exists already but also promote the benefit of independent and alternative means of knowledge gathering.

For example, we can arrange meetings with asset managers on specific asset classes and on specific types of investment structures, e.g. hedge funds, commodities, foreign exchange transactions, where specialist expertise can be brought in to broaden the knowledge spectrum.

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