If your company operates a defined benefit pension scheme there is a good chance it will be one of the biggest risks facing the company. However, the scheme itself will be managed by trustees who are required to act independently of the company.
This is an important protection for pension scheme members but it presents a challenge because one of your most significant risks is largely out of your control.
Appointing the right trustees, with the right skills and experience, is therefore one of the most important decisions that a company can make. In this guide, we set out a 4-step plan to help companies when appointing trustees.
Step 1: Take a step back – what does your scheme need?
Your chair of trustees has retired. Your experienced member-nominated trustee has resigned. Your finance director who acted as a trustee and reported back to the company’s board has left the business. What do you do?
For many companies the answer is typically to find the next person in the business who will volunteer to become a trustee. Before doing this we would encourage you to take a step back and consider the position of your scheme more generally and how you see this changing in the next five or ten years. This will not take long but it will enable you to make a more informed decision and improve the way the scheme is run going forward.
Step 2: Review your existing trustees’ skills and experience
Once you have considered what your scheme needs and have developed some thoughts about the future of the scheme, consider how the skills and experience of the existing trustee board will help to achieve these objectives.
The outcome of this review will depend on the circumstances of each individual scheme but some common scenarios are:
Step 3: Check your trust deed
The most important document when making any decision in respect of your pension scheme is your trust deed. Most trust deeds will allow the scheme's principal employer to appoint and remove trustees but you should check to ensure this is the case.
If you do have the power to appoint and remove trustees then before making any changes you should consider:
Step 4: Decide who to appoint
Once you have been through the process above you should have an idea of:
Taking all of this into account, you should be in a much better position to identify any changes that should be made and the candidates who would be best placed to enhance your trustee board in the future.
If you’re looking for a leading independent professional trustee to help you run your pension scheme effectively, please contact one of our experts.