Master Trusts have excelled in creating a strong and effective framework to operate within. This has a number of elements, starting with purpose and objectives. Whilst initially it may seem obvious what the purpose and objectives of the Board are, it’s surprising how many Boards struggle to answer this question.
Therefore, spending time to clearly articulate this and agreeing them with all stakeholders is critical. Asking trustees on an individual basis, and using an independent party to help determine this can be particularly helpful as it avoids any conflicts of interest, encourages openness, and allows areas of disagreement to be identified.
- Skill set
As with any executive Board, having the right skill sets will drive better outcomes. These have to be complementary and, in my opinion, have to be greater than the sum of the parts. Bringing together a diverse board with differing skills will lead to better debate, challenge and outcomes. Like a corporate Board, many of the leading Master Trusts have specific role profiles, and employ specialist search and selection agencies to assist in recruitment.
When deciding what skill sets are required, consideration should be given not only to the objectives, but the member demographics. This is one area where Master Trusts have generally struggled, as it is difficult to cater for a very wide demographic. However, for many single employer schemes it should be easier. Master Trusts have overcome this challenge by creating member forums and this model can be replicated if finding someone willing to become a trustee is proving difficult.
- Effective decision making
As I’ve mentioned in previous articles, how decision making works is critical in delivering better outcomes, not just for members, but for all stakeholders. Many Master Trusts continually assess how effective they are, whether all trustees have an equal voice, what training is required, and whether ‘group think’ is creeping in.
Having an effective structure in place that can make decisions in a considered but speedy manner when required (i.e. not just once a quarter) can be the difference between an opportunity maximised or an opportunity missed, and the processes Master Trusts have adopted really do make a difference.
- Executive support
The scale of most Master Trusts means that they have the ability to create a comprehensive executive function that is there to support the Board on a day-to-day basis. This is more than just a secretariat function, although of course that is very important and part of the support. The Executive is there to work with the Trustee and their advisors to deliver the vision, lead projects, identify member trends, assess the impact of changes in legislation and manage the ‘Trustee Dashboard’. The Executive should be the Board’s confidant, critic, and friend!
Whilst many schemes won’t have the resource to have a full-time dedicated Executive, this type of support can be obtained externally and provides an independent view of how a Board is performing. For example, Capita Pension Solutions has a team that provides an Executive function for clients and this is being increasingly used by Trustees of both defined benefit (DB) and defined contribution (DC) schemes, as they see the value that such a service can bring, whether that be on an on-going or project basis.
The future of governance for single employer schemes
Through legislation, guidance from The Pensions Regulator, and experience, pension scheme governance has been substantially enhanced over the years. Many Master Trusts are now building on these foundations to take governance to a new level. Yes, they have bigger budgets and better resources than most single employer trust schemes, but that does not mean they have an exclusive right to the enhanced governance model. Single employer trust schemes can put in place a similar structure in a cost effective manner and look to replicate the key elements to drive better outcomes for all.
This article was featured in Pensions Aspects magazine October edition.
Last update: 7 October 2021
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