Warning about pension trustees vested interests

Warning about pension trustees vested interests

The trade body for member-nominated pension scheme trustees has warned against allowing vested interests take over the governance of pension schemes.

The Association of Member Nominated Trustees stated that, of the three groups of trustees - employer-nominated, member-nominated and independent - only the former was free of any vested interest other than that of its members' needs in retirement.

Currently, the trustee boards of pension schemes are obliged to keep a third of their seats open to member-nominated trustees. However, if members fail to nominate trustees, the board is under no obligation to force nominations.

Association co-chair David Weeks argued that without member-nominated trustees, employer-nominated trustees were in danger of putting business interest ahead of the pension scheme, while independent professional trustees have an interest in "generating an income for themselves".

He said the role of the member-nominated trustee was "sometimes underplayed or undervalued", but insisted it was "crucial for the running of a scheme that members are represented at the top table if the going gets rough".

He said recent high-profile governance failures emphasised this need, adding members needed "reassurance" that their interests were represented on the trustee board.

"Good pension scheme governance should be viewed as a triangle, the three sides of which need to be kept in balance," he said. 

"Sponsoring employers form one of these sides, pension professionals form the second and pension scheme members, together with their member-nominated trustees, form the third and most important of the three sides."

He argued members needed to know that they were not being "ripped off in excessive costs and charges".

"Scheme members must be happy that they are getting good value if they are to make higher levels of contribution needed to fund increasing numbers of years in retirement.

"The other sides of the triangle both have competing interest in this area - the employers can exploit situations of surplus and divert assets and the experts have an interest in generating income for themselves.

"The member-nominated trustees are the only ones who have no personal interest or gain other than that of the members’ best interests.”

The issue of pension governance came under particular scrutiny last year, when BHS collapsed, resulting in the pension scheme falling into the Pension Protection Fund.