Martin Tilley: Who will vet professional trustees?

In my last article for SIPPs Professional, I focused on the role of the professional trustee and outlined the fiduciary responsibilities cast upon them as emphasised by the Pensions Ombudsman (TPO) in its case PO-256984. I spoke on the topic at the Association of Member Directed Pension Scheme (AMPS) conference in May and further speculated on professional trustee compulsion, accreditation, and regulation. These topics have sparked much debate so I thought I would share some thoughts and crystal ball gazing. Firstly, is the compulsion to have a professional trustee necessary to protect member outcomes? I would argue that unless member trustee training, understanding, ability and accountability is increased significantly, it should be. We have seen compulsion before, from the late 1970s through to the abolition of the Pensioneer Trustee role in 2006. While compulsion hints at greater governance and therefore good member outcomes, it does far from guarantee them. I am sure that during their period of tenure, many HMRC-approved Pensioneer Trustees were not fulfilling their roles as diligently, certainly as TPO suggests, and in fact as legislation would require. Even post 2006, the responsibility of those firms who have continued to offer professional services has been mixed with an over reliance on the member trustees taking responsibility for their own funds, whether they were aware of their own responsibilities or not. Unless a universal high standard of professional trustee can be assured, members may continue to suffer poor outcomes. The fact that they may be open to some form of recompense will be of little comfort. So, would an accredited professional trustee standard provide that comfort? I would suggest that it would, but from where and what body should accreditation be granted? Many providers of SSAS services trumpet their membership of AMPS, and while as an industry trade body it does an excellent job for its members, membership affords no degree of assurance of exacting standards. Might there be scope for a public sector-led accreditor to step forward? Previously it was HMRC who were able to grant the Pensioneer Trustee approval but, based on my own experience of obtaining individual pensioneer trustee status in 1997, this was not a comprehensive vetting. I am led to believe that HMRC is unlikely to have an appetite for such a role, nor do they have the resources or expertise to offer it effectively. Logically, the Pensions Regulator (TPR) is best equipped to fulfil the role. It does, after all, regulate large occupational schemes and in fact SSASs with more than one member. However, based on an estimated 50,000 SSASs with an average membership of three, total membership of around 150,000 sits well below membership numbers of just one of the large schemes they regulate. Further, with an estimated one hundred plus professional trustees providing services to SSASs, I can only guess at the resources necessary to assess the market. And finally, what would that accreditation or regulation look like? The issue with any accreditor or regulator is that they must take the role responsibly and I would imagine that a detailed review would be necessary of those controlling the business and holding significant management functions. An in-depth analysis of processes, systems and controls would be necessary as would a review of past books and practices. This is beginning to look very much like the regulated responsibilities and practices of the Financial Conduct Authority who, of course, are responsible for the SSASs sister pension vehicle, the Self Invested Personal Pension. Those involved with the latter will be aware of the costs of obtaining and retaining regulated status and I wonder if similar were to apply to professional trustees, would they be acceptable to the market or indeed to the schemes to whom those cost would inevitably be passed? Such a fee might also drive out any perfectly well-run smaller providers of services. We do know that TPR will be taking the matter very seriously and will have identified the harm suffered and potential for poor member outcomes under the current governance arrangements. I am sure that where improvement is necessary, we will see their views soon. What the professional trustees and SSAS professionals should be doing is offering to work with any accreditation body or regulator to shape a suitable future which works well for governance oversight, the industry and most of all, the scheme members. Martin Tilley is chief operations officer at WBR Group martin.tilley@wbrgroup.co.uk

Martin Tilley: Who will vet professional trustees?

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