Best Practices for Pensions Trustee Boards and Investment Committees

How can trustee boards and investment committees be more effective?

Pensions trustees and investment committees shoulder significant responsibility, yet there is little research available to guide them on best practices for decision-making. Below we list some of the best papers on best practices for pension trustees and investment committees. These reports discuss many of the key issues faced and consider how to approach the decision-making process.

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BOARD EFFECTIVENESS AND DECISION MAKING

Board effectiveness: Lessons from companies to trustees (LGIM, 2019)

(For compliance reasons, this paper is not accessible in the United States & Canada)

In this six-page note, LGIM discusses the lessons that a board of trustees can learn from corporate governance practices. The authors explore factors such as the importance of transparency, the skills and diversity of the board, and the virtues of having a senior independent director.

A Primer for Investment Trustees: Understanding Investment Committee Responsibilities (CFA Institute Research Foundation)

This comprehensive, 160 page document examines in detail the investment issues of importance to investment trustees. Most trustees have little direct investment experience, and yet are responsible for setting objectives, establishing investment policy and laying down governance guidelines. This publication covers all of this and much besides, whilst avoiding the use of investment jargon.

UK Pensions: Costs, Fees and Trustee Decision-Making (Aon Hewitt, 2017)

(For compliance reasons, this paper is only accessible in the UK)

This 14-page paper considers both the explicit and implicit expenses and fees associated with asset management. The report is informed by the results of a survey of trustees of UK defined benefit pension schemes, which found that implicit fees are not well understood, particularly by trustees of smaller pension schemes.

Assessing Trustee Board Performance (Pensions Management Institute, 2017)

This useful, two-page article, published by the PMI, argues that it is important to regularly measure the performance of the Trustee Board. Given that the role of the trustees is a complex one, it may not be immediately obvious how their performance should be measued, but this paper helpfully explores how trustee performance can be reviewed and reported upon.

Frameworks for investment policy statements: guide for U.S. plan sponsors

(For compliance reasons, this paper is only accessible in the United States)

An Investment Policy Statement (IPS) is designed to provide plan fiduciaries with a framework for investment decisions. This 10 page report from Vanguard considers each of the key elements that should be contained within the IPS.

Investment considerations for superannuation trustees (Willis Towers Watson, 2017)

(For compliance reasons, this paper is only accessible in Australia & New Zealand)

This 12-page Willis Towers Watson paper examines several different return objectives and portfolio construction frameworks that superannuation fund trustees might consider.

Duty, opportunity, mastery: Investment committee best practices (Vanguard, 2017)

In this 20-page paper, Vanguard offers insights and practical guidance into how investment committees can improve the quality of their decision-making on behalf of their organizations.

Long-Term Investing - Portfolio Guide (FCLT, 2015)

This award-winning 60-page document examines approaches that institutional investors might explore in the quest to find new, long-term, investment strategies. The report discusses five action areas and suggests a process for the enhancement of long-term investment outcomes. Key issues discussed include risk appetite, investment mandates, benchmarking, performance measurement and incentivisation.

Best practices in the Pension Funds investment process (PwC, 2016)

This 130-page report is founded upon the results of a survey of some of the world's largest pensions funds. The authors summarise the research to reveal the best practices of global pension funds.

Material Change: A five-step ESG Checklist for UK Trustees (LGIM, Mar 2019)

(For compliance reasons, this paper is not accessible in the United States & Canada)

In this concise, 10-page note, one of LGIM's ESG experts provides guidance to help UK pension trustees navigate the new requirements on financial materiality of ESG factors.

Investment Guidance for UK DB Pension Schemes (The Pensions Regulator, 2017)

(For compliance reasons, this paper is only accessible in the UK)

This 80-page guide from the UK Pensions Regulator provides investment guidance for trustees of UK DB company pension schemes. Topics covered include Investment policy, governance, asset-liability matching, growth assets, policy implementation and monitoring of results.

DEFINED CONTRIBUTION PENSIONS

Defined Contribution Investments on Trial (PGIM, 2018)

PGIM argues that DC plan sponsors should adopt an "institutional" approach to investment design, in order to improve retirement outcomes. This shift, they suggest, will better equip sponsors to meet their fiduciary obligations and will be to the benefit of all stakeholders and plan participants.

The Good, the Bad, and the Ugly: Which Will Your DC Plan Be? (Callan, Jan 2019)

(For compliance reasons, this paper is only accessible in the United States)

In this 10-page report from the Callan Institute, DC Consultant Jana Steele discusses best practices for DC plan sponsors. In a concise survey of some of the key issues, the report discusses DC plan design, due diligence, governance, long-term planning, health savings accounts, communications and documentation.

10 Best Practices for Global DC Plans (State Street)

This 24-page report from State Street Global Advisors identifies 10 best practices for global DC pension plans. This well-presented report includes sections on governance frameworks, investment philosophy and the promotion of higher savings rates.

ABOUT THE AUTHOR

Andrew Perrins is a former Actuary and Asset Allocator. as an Actuary, he worked for 15 years in, serving as Director of Asset Allocation for Abbey Life Chase Manhattan, before setting out on a more entrepreneurial path. 

To contact him, email [email protected]