Pension schemes and the misnomer of the “Sole Trustee”

The structure of pension scheme trustee boards has developed over time, from the introduction of the legal requirement for member-nominated trustees to the professionalisation of trustees. And, clearly, the development is ongoing.?

More and more sponsoring employers are thinking about making major changes to their trustee boards. In many cases, this includes the option of moving to a model where a professional trustee firm is appointed to be the sole trustee of the pension scheme.??

But calling this a “sole trustee” or even a “sole professional trustee” model can be confusing and misleading. This can lead to this approach not being given the consideration it deserves. I have had a number of conversations with clients over the last few months about the option of appointing a sole professional trustee firm. But sometimes their initial response has been along the lines of: “but it would not be appropriate for one person to act as the trustee of our scheme.”

Professional trustee firms have developed their “sole trustee” offering over the years. In most cases it is now clear that appointing a single firm to be the sole trustee involves so much more than appointing a single person. There are an increasing number of professional trustee firms in the market whose sole trustee offering is rather impressive. There is normally a single key point of contact. But, as a minimum, there would be a second person to ensure compliance with the Association of Professional Pension Trustees’ code of practice. In many cases there will be further support staff to deal with day-to-day matters. This could also be combined with an oversight / governance structure to review the decision-making process on a regular basis.?

In addition, professional trustee firms are recruiting their people from a wide range of backgrounds. This includes individuals who are well versed in occupational pensions but also others who have highly relevant and valuable experience in other sectors. This approach means that the range of experience and knowledge these firms offer can be much wider than could be achieved by some (but not all) sponsoring employers with a more traditional trustee board structure.??

As such, using a sole professional trustee firm structure is effectively?the appointment of a board of professional trustees. It’s just that all of these professionals work for a single firm.??

I am not saying that the sole professional trustee firm model is right for all sponsoring employers and their pension schemes. But I think key decision-makers should understand the various options available to them. The misconceptions around the term “sole trustee” are making this difficult. Perhaps it is time to choose different terminology for this model of trusteeship.??

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