Recommendation 35

HM Government Not Addressed

We are already in the process of ensuring we thoroughly assess the value for money (VfM) provided by the independent trustees (IT) we appoint. This would include comparing how much the IT is able to recover with the costs of them doing so and what impact this will have on members’ pension pots. These amounts are likely to vary from appointment to appointment, but our decisions on making trustee appointments are always driven by our objectives to protect savers, with VfM taken into consideration. We run a competitive tender process to select the trustees that can provide the best value for money. We have already increased the number of firms we invite to tender for each appointment type. At one time three firms were invited to tender for scams cases, but we now invite a minimum of five, and we expect this number to increase on the conclusion of this year’s annual reviews of the firms on the trustee register. Annual meetings with trustees on the trustee registers are already being held to encourage greater co-operation and build relationships. We hope that this will increase the volume of tenders. Independent trustees are skilled professionals and play an important role in combating scams. When TPR makes an appointment for IT to take control of a scam scheme’s administration it helps: • prevent more people becoming victims and losing their pension pot • preserve any remaining scheme assets • disrupts scammers • gather evidence to prosecute perpetrators Often, by the time IT are appointed, most of a scam scheme’s funds have already been lost and are unrecoverable, which also underscores the importance of communication campaigns to prevent savers from becoming victims in the first place. Being appointed to a scam schemes can be time-consuming, complex - involve pursuing money across multiple jurisdictions or tax issues – and costly. Often the schemes lack basic administration or financial records. Scheme documentation can be deficient – which can require legal input and court direction to remedy. Legislation dictates the cost of work done by the IT must come from members’ residual funds. We do have the power to order trustee costs to fall as a debt to the employer. However, in most cases the employer linked to scam schemes is not trading and has no assets. Once appointed, trustees update us regularly on their progress, including costs and fees incurred and this information is considered in relation to a trustee’s tender for the work and we challenge any significant variance. All trustees on our register have agreed to have their costs and fees scrutinised by an independent adjudicator and to be bound by that adjudicator6 as to fees and costs. Feedback from some firms suggests these appointments are not generally seen as desirable or profitable often making little to no profit, and often a loss. Not all firms are interested in receiving invitations to tender. This is challenging work, requiring a certain skillset, level of experience and business model. Finally, it is worth noting that there is often a slim profit margin, and even an uncertainty of receiving full payment at all as assets may prove difficult or impossible to recover. Therefore, only a certain number of independent trustees appear to be interested in the work and only a certain number have the staff with the relevant skills and experience often required at short notice.