Source · Select Committees · Work and Pensions Committee
Recommendation 12
12
Acknowledged
Paragraph: 101
Introduce measures to improve sole trustee accountability and member involvement in appointments
Conclusion
The use of sole trustees is increasing. While they can bring knowledge and expertise, there is the potential for conflicts of interest. We are concerned that employers often have a unilateral power to appoint sole trustees in the place of the existing trustee board, including member nominated trustees. DWP should introduce measures to improve the accountability of sole trustees and to enable scheme members to be involved in their appointment.
Government Response Summary
The government acknowledged concerns regarding sole trustees and existing safeguards, committing to consult on what, if any, further action might be needed in the future, rather than introducing specific measures or member involvement now.
Paragraph Reference:
101
Government Response
Acknowledged
HM Government
Acknowledged
As the WPSC highlight, there is an increase in usage of professional sole trusteeship. This trend is not only affecting DB schemes but is being experienced across all types of trust-based pension scheme. Research from Lane Clark Peacock suggests there has been a 30% increase in the number of professional sole trustee appointments over the last year, and that the number of such appointments has doubled since 2021.14 The professional sole trustee model can be a way to bring expert capability to the running of schemes, and be a cost-effective way to manage, for example, small or legacy schemes. However, such models do raise areas for consideration, such as trustee diversity and members having less of a voice in decision-making. There are also concerns about real and perceived conflicts of interest, which must be effectively managed. The Association of Professional Pension Trustees’ Code of Practice for professional sole trustees15 outlines how firms providing professional sole trustee services should act in terms of independence and conflicts. Pension scheme trustees play an essential part in securing member benefits. All trustees regardless of whether they are a lay or professional trustee must comply with the rules of the scheme and legal requirements, including a duty to act in the best interests of all beneficiaries, both now and in the future. There are already safeguards in place to hold professional sole trustees accountable for their actions. TPR has powers to remove and replace trustees, or add an independent trustee to a trustee board, should it have concerns about existing trustees’ capability or behaviour. These powers are applicable to professional sole trustees and all trust-based pension schemes. 14 https://insights.lcp.com/rs/032-PAO-331/images/LCP-Sole-Mates-September-2024. pdf?utm_campaign=Solemates&utm_medium=bitly&utm_source=website 15 https://appt.org.uk/wp-content/uploads/APPT-CoP-for-Sole-Trusteeships-final.pdf TPR has also announced16 they will be extending their engagement with the largest professional trustee firms to identify and mitigate any risks to pension savers. TPR is looking to have a clearer understanding of the risks and benefits of the sole trusteeship model to identify if further safeguards and interventions are required. There are already significant safeguards in place in this area. Through consultation we will establish what, if any, further action might be needed for the future as the pensions landscape changes.