Wednesday, December 20, 2023

Professional Vs Lay Trustees: The Great Pension Scheme Debate

Picture is from last months Professional Pensions Investment Conference where I put forward arguments in favour of member nominated lay trustees on trustee pension committees/LGPS boards. While Richard Hubbard, spoke in favour of Professional Trustees.

It was pretty good natured debate chaired by the Editor-in-chief of Professional Pensions, Jonathan Stapleton, followed by a Q&A from the audience. Richard argued that the present system was not fit for purpose and the complexity of modern pension fund investment meant it was unfair to expect lay trustees to have the skills and experience necessary to be running massive multi million or even multi billion funds.

My reasoning was that member nominated trustees have a vital role, since this is usually all about their own money. Their pensions, their "deferred pay" in law. Their financial futures. There have been a number of dreadful financial scandals over the years by financial "professionals". Remembering that Member nominated lay trustees was largely brought about following the Robert Maxwell theft of pensioner funds. 

There is a tradition in pensions, local and national government and charities of the interested lay person, assisted and guided by trained officer,s asking the simple but difficult questions and challenging the "Group think" and "follow the herd" instincts that financial services are too often influenced by. 

I think it is naive not to accept that there is a conflict of interest between pension savers and the financial service industry as a whole. That is not to say that the present lay trustee model is perfect and does not need reform and that I have worked with a number of reputable professional trustees over the years. 

I argued that member nominated trustees need greater support from employers and statutory time off to undertake all their their duties and receive proper training. Pension boards or sponsors must pay for this. I mentioned a recent report by the AMNT (Association of member nominated trustees). There should be at least one "accredited" pension trustee on a board, whether professional or lay. The qualifications are the same. 

There was a flurry of questions and no doubt this subject will be revisited again and again, especially with the push to consolidate pension funds. 

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