Trustees overwhelmed by increasing complexity of pension plans

A panel of industry professionals speaking yesterday (26 May) at the Pensions and Lifetime Savings Association (PLSA) investment conference in Edinburgh unveiled the finding, published today in a report by industry group Mallowstreet .

That of the firm Syndic’s report 2021 – published in partnership with Janus Henderson Investors and in association with the PLSA, the Association of Member-Nominated Trustees, the Pensions Management Institute and the Association of Professional Pension Trustees – said the increased burden on trustees was much more visible since the same Research was undertaken in 2019.

Speaking at today’s panel, Mallowstreet co-founder and board director Dawid Konotey-Ahulu said it was evident that directors “don’t feel ‘have the bandwidth’ to meet regulatory expectations.

Administrators’ overall satisfaction with workloads and resources has halved since the same research in 2019, added Janus Henderson, director of UK institution Anil Shenoy.

“Regulation is really highlighted with BPF equalization, end-game planning and ESG integration emerging as key issues.”

Increased workloads

PTL professional administrator Anne Sander said the stresses felt by administrators are especially amplified for small projects with severe budget and resource constraints.

“Pensions have always been complex and the challenge, especially for smaller plans, is the speed of regulatory change,” she noted. “Boards are smaller and departing directors are not replaced.”

She added that a particular stress for administrators was the deadlines in which they were expected to work.

“For example, the time between the release of guidelines and the implementation of programs is simply not enough,” she said.

“It almost feels like the regulators are now the public, not the members.”

Paul Rhodes, trustee director of the Reach pension scheme and member-appointed trustee (MNT), said smaller defined contribution (DC) schemes were also facing a “regulatory push” to move to master trusts.

Despite this, he noted Mallowstreet’s findings that nearly half (43%) of DC trustees have “no desire” for their plan(s) to move to master trust arrangements.

Citi UK Pension Plans chairman Colin Stewart added: “Being a director is not an easy job. The wave coming from regulators and the complexity of what boards are facing now is quite significant. and administrators feel overwhelmed.”

NCDs are also at particular risk of feeling overburdened, the panel said.

“Being an NCD is a very daunting and significant commitment and investment,” Stewart said. “As an industry, we need to find a better way to support them.”

Collaboration is key

All panelists agreed that a higher level of collaboration between plans would all help relieve pressure on their administrators and bridge the growing divide between large and small plans.

“The pension regulator has engaged with many schemes, which has been very helpful, but there also needs to be this collaboration between the schemes,” Stewart said. “Larger systems have a lot of resources and there are ways to share them with smaller systems without risking privacy.”

Stewart added that the increased sharing of ideas and information should be easy given that major projects are “well known to each other.”

“There’s a lot of discussion and ideas being shared, which is very helpful when it comes to designing new defaults, analyzing member reactions to changes, etc.” he explains. “But it’s all very informal and that’s mainly because of the relationships between the individual directors.”

Rhodes agreed, “There could be a much more beneficial collaboration.”

Sander said collaboration was notably lacking on the side of smaller programs, but she had seen collaborative efforts between programs that shared sponsors.

ESG at risk

The lack of collaboration between schemes and the lack of strong communication across the industry between sponsors, employers and asset managers also impact the ability of some schemes to properly integrate ESG, noted the panel.

“Small plans simply don’t have the budget and governance time to devote to ESG integration,” Sander explained. “They will roll over the coat tails of the big projects.”

Sander added that some programs she has worked with have had to downgrade climate-related financial disclosure task force reports to “checkbox” operations due to constraints and stress.

“Boards really understand there is a cost, but it’s a question of how they manage it within the governance budget they have,” she concluded.

Sharon D. Cole