Trustee (noun): An individual person or member of a board given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified. For example, pension fund trustees.
Pension fund trustee: A person who holds and looks after pension assets for the benefit of members and their dependents, and for the purpose of providing income in retirement.
Responsibilities and duties of a trustee: Under the Pensions Act 1990, pension scheme trustees must ensure that schemes are run properly, adequately maintained and monitored, up-to- date and regularly discussed with members.
There it is in black and white the how and why of the pension scheme trustee. For the member, this is a safeguard and reassurance that their assets are being handled by the best people possible, individuals who have been nominated to their role of trustee and who pride themselves on doing what is best for that pension scheme.
If only it were that simple. Ask any trustee and they will explain to you the volatility and uncertainty that goes hand-in- hand with their role. Indeed, in hindsight, some might even refuse the offer and honour of becoming a trustee. And with good reason.
Being a trustee can be a difficult and arduous vocation. You must administer a trust in accordance with trust laws, act in the best interests of beneficiaries and take great care to make informed decisions.
Little wonder there can be several duties of the trustee that can keep them awake at night. Let’s look at some of these ‘concerns’ and how best they can be avoided.
Ensuring things such as pension authority fees are paid, members benefit statements are issued, and the annual report has been prepared on time, are generally a task for the scheme administrator but are ultimately the responsibility of the trustees and as such can also cause angst for trustees.
Remedy: Get organised and get some help. One of the big difficulties facing trustees is that like the members of the pension scheme, they are time precious. Staying on top of their duties can simply slide unintentionally if not micro managed. To fulfil the mandate, delegate.
It is important that as a trustee you regularly review the performance of all the funds options contained under the trust. In practice it is not practical for the trustees to have the time at quarterly meetings to meet all of the fund managers to review their performance and as such they must rely on their investment advisor to monitor performance and recommend the funds that are most likely to meet members varying needs.
Remedy: To this end it is hugely important that the advisor in question has no conflict of interests and thus can solely focus on member outcomes when monitoring funds and deciding on which product is best for the members of the scheme.
Good governance is the foundation stone for any person charged with a responsibility for pension assets. Without it, decision-making would be nigh on impossible. Why? Because the traits of good governance range from integrity to transparency, accountability to efficiency. Try to shape a pension scheme or mentor members on a fund where any of these characteristics are lacking and you’re in for a bumpy ride.
Remedy: Take stock of your duties and make it good practice for good governance to be a given. Make yourself approachable where all decision-making is concerned. Stay true to your intentions – to reap rewards for members – and peel back any layers of confusion so that the end product is transparent and clear. In short, stick to the rules.
The vast majority of pension scheme could vastly improve how they communicate with their members. Members not engaging with the pension scheme is a common complaint of trustees and employers alike. Pensions don’t make for the most stimulating of subjects. If members are not attending or taking an interest in their funds, then the fault lies with the trustee because a clear and concise line of communication does not exist.
Remedy: Younger members may take some persuasion because the word retirement isn’t even on their radar. Mention the importance of saving for your future, setting aside with the aim of a more comfortable life after work and ears are more like to perk up. The earlier in life people take an interest in their pension the better their outcome in retirement is likely to be.
- Edward O’Hanlon is Pensions and Investment Advisor at Acuvest. If you have any comments please email EdwardOH@acuvest.ie
Acuvest is an independent pensions and advisory management business taking care of the futures of over 40,000 of our clients’ employees. For more market analysis and expertise follow Acuvest’s daily updates on Twitter @AcuvestIreland and LinkedIn on our Acuvest Limited page.