Should professional trustees be regulated?

Pardon the Interruption

This article is just an example of the content available to mallowstreet members.

On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.

All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.

The chief executive of the Pensions Regulator has said that regulating professional trustees is something TPR should give “quite a lot of consideration to”. 
Charles Counsell, CEO of the regulator, made the remarks when he gave evidence to the Lords Industry and Regulators Committee on Tuesday, where peers were seeking answers from TPR and the Financial Conduct Authority about the market turmoil of late September that followed the Mini-Budget.  

Governance of DB schemes under scrutiny 

At the hearing, Counsell said governance in smaller DB schemes was on the whole poorer than in larger ones. Lord Cromwell noted that regulators made “numerous references to the trustees’ variable skills”, arguing that this sits at odds with its view that trustees are ultimately the guardians of the pension scheme. “You can’t have both positions at the same time,” Counsell was told. 
The CEO said TPR was working to accelerate consolidation of pension schemes with a view to requiring that at least one professional trustee should sit on each trustee board, something it had previously mooted but is currently impractical given there are thousands of schemes. 
The committee also highlighted the lack of regulation of professional trustees. A voluntary accreditation system is in place, and while the regulator encourages professional trustees to obtain accreditation, it has no power to require this. 
Counsell said: “In terms of their regulation going forward, I think that does bear thinking about. We do need to consider whether or not there are benefits of regulating professional trustees. At the moment they’re not regulated and it’s certainly something that I think we should give quite a lot of consideration to.” 

APPT: There would need to be consultations 

Accreditation is currently managed by two bodies, the Association of Professional Trustees and the Pensions Management Institute.  
The APPT gave the prospect of regulation a cautious welcome. Harus Rai, who chairs the association, said whether further regulation is required depends on what it was looking to achieve.  
“We would support changes in regulations designed to genuinely and realistically improve pension scheme governance and further secure members’ pension rights, but there would need to be well-considered consultations to fully explore any proposals,” said Rai. 
He added that accreditation has so far been a success, with over 450 individuals meeting the requirements on a voluntary basis with either the APPT or the PMI. 

PMI would mandate accreditation

The PMI said regulation of professional trustees was inevitable and accreditation should be mandated. 
“We believe strongly that formal regulation is necessary to provide consistently high standards throughout the sector. We would also argue that as the UK transitions towards a UK pensions culture in which there will be a small number of large schemes, regulation is both paramount and inevitable,” said Tim Middleton, director of policy and external affairs. 
The regulation of professional trustees should be carried out by a body with extensive experience of managing professionals within the pensions industry and with particular experience of trusteeship, he said, adding: “Regulation itself would be based on the existing accreditation and CPD requirements for professional trustees, something the PMI is uniquely suited to facilitate.” 
Middleton noted that the regulation of professional trustees has become necessary ever since the GP Noble scandal dating back to 2007. 
The GP Noble Trustees Ltd scandal was a £52m pension fraud which ended with the firm’s owner Graham Pitcher being sentenced to eight years in jail. The APPT was established in direct response to the GP Noble debacle to provide assurance that its members were “credible and bona fide professionals”, said Middleton. 
In 2017, TPR challenged the professional trustee sector to develop a system of formal accreditation, leading to the formation of the Professional Trustee Standards Working Group. The group produced formal standards for professional trustees and devised accreditation requirements. 

Regulation of firms or individuals? 

While the PMI seeks regulation that mandates accreditation, Chris Roberts, a director at trustee firm Dalriada Trustees, said there is a difference between accreditation and regulation.  
“We cannot see a rationale for trustee firms not being regulated, but this should be at a company level bringing minimum standards of process, peer review, conflict management, and accountability,” he said, noting that sole practitioners should be judged as a firm as well. 
Roberts contrasted such regulation of firms with the accreditation of individuals. 
“We fully support the regulation of trustee firms and believe it will drive better standards across the industry. If we have independently accredited individuals, working for regulated firms we will be better equipped to challenge and to identify the next big issue early,” he said. 

Would you welcome regulation of professional trustees? 

Chris Roberts
Tim Middleton
Harus Rai
Nita Tinn
Janice Turner
Maggie Rodger
Naomi L'Estrange
Michael Chatterton
Zahir Fazal
Richard Butcher

More from mallowstreet