Trustee Board Questions How ESOGs and ORAs have greatly increased trustees’ practical power

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You have probably noticed the change of power that took place recently. I’m not talking about the one in politics, I’m talking about the one in pensions.

The one in pensions, however, does have something in common does have something in common with political power at Westminster. Let me explain.

Where does the Prime Minister get his power from? Obviously, he’s head of the party that’s just won the general election, but the election is over now. And he’s got practical power initially in that he does the hiring and firing, but once he’s done the hiring, he can’t do much firing and rehiring without losing a lot of credibility. If he isn’t able to exert central control over his ministers, he will soon become a mere figurehead. What he needs is a practical control over his ministers to ensure that he knows what they’re doing in detail, so that they are properly answerable to him.

The Prime Minister does indeed have such a practical control built into the political system. And almost no one recognises it for what it is.

When most people think of Prime Minister’s Questions, they think of the leader of the Opposition and the Prime Minister wielding words like fencers wields swords, with both sides baying their champions on. If they think about its place in the system of government, they think about it as a mechanism for Parliament to hold the Prime Minister to account. Once a week every Wednesday at noon the Prime Minister has to answer for the government’s actions.

And so it is. But it is more than that.

Because every Wednesday morning before Prime Minister’s Questions, the Prime Minister must prepare for them. He needs to be briefed on every aspect of government. MPs can ask him without notice on any subject that takes their fancy, and so they do. The Prime Minister has to be on his mettle. So every department must have him ready for whatever challenges might be thrown in relation to their responsibilities. He must understand what the controversies are, he must be ready with the government line on those controversies. And if he doesn’t feel comfortable with the line he’s supposed to hold, he’s got an opportunity to have the policy updated to his own liking toot sweet.

What this means is that Prime Minister’s Questions offers the Prime Minister enormous practical control over the whole of government. He gets briefed on everything. He gets the opportunity to hear what’s brewing. He gets the chance to bring an end to any frolics that individual ministers might be contemplating at a very early stage. He gets to see the storms on the horizon. If you want to understand why Prime Ministers are usually so dominant in government, Prime Minister’s Questions forms a big part of the answer.

Right now, pensions is changing in an analogous way. The Pensions Regulator has introduced the general code and as a result trustees must set up their effective systems of governance. They are being charged with performing periodic own risk assessments as well.

Think about it. Trustees have always had the power if they really wished to get stuck in like this, but it’s fair to say that some administrators and advisers have been wary of letting trustees get this deep into their workings, preferring to maintain a certain discretion (and practical power). In practice, trustees have usually acquiesced, especially when all seemed to be working well.

The Pensions Regulator has given trustees that same control over the scheme that Prime Minister’s Questions gives the Prime Minister. The Regulator has put in place a structure by which trustees are mandated to delve into the guts of the scheme, and the administrator and each adviser must assist. Wariness of trustee involvement is no longer an option for them.

Now it’s up to trustees to use that structure. By using the responsibilities placed in them, they can get a much more detailed grip on the running of the scheme than they may have had to date. Time for us all to step up.