Do I know my pension scheme? Am I confident that I am complying with my trustee duties?
These are questions which trustees are increasingly asking themselves. Stronger Pensions Regulator
powers, increased legislation and the (coming) General Code, to name a few, mean there is more
pressure on trustees than ever.

Do you have sufficient trustee knowledge and understanding/TKU?

Trustees need to have sufficient TKU in relation to pensions, trusts and related areas (e.g. funding, investments and environmental, social and governance (“ESG”)). Trustees should assess what they know and don’t know. There is copious training and materials available from advisers and third parties which can fill any gaps in knowledge and give confidence that informed, reasonable decisions can be made.

Are you familiar with your scheme’s legal documents?

Trustees are expected to have a working knowledge of their scheme documents. Most schemes now have a repository online in some form. It’s common to find legacy rules still apply to deferreds and pensioners. A diagram breaking down the current membership by date of leaving can be a simple key. The contents of legal documents can’t always be taken at face value because of statutory requirements and trust law, and trustees rightly take advice, but familiarity with the basic materials puts them in a better position to get the most out of their advisers. A balance of powers summary is another useful tool to show whether key decision powers sit with trustees or the sponsoring employer.

Are your actions furthering the purpose of the scheme?

Pension schemes are set up to provide retirement income for members. To achieve this, trustees have to act in the best interests of beneficiaries, which is generally understood to mean their best financial interests. When considering which investments to make, trustees have to set aside their own social and political views. Making sure they have appropriate regard to matters such as ESG and climate change can be a fine balance.

Are you safeguarding scheme assets?

Trustees have to safeguard and invest scheme assets in line with the scheme’s investment power and regulations, and diversify investments. Trustees shouldn’t put “all their eggs in one basket”. It is important to avoid excessive reliance on any particular asset.

Are you exercising powers properly?

As a rule of thumb, trustees should:

• not go beyond the scope of their powers;
• not use powers for an improper purpose; and
• give proper consideration to relevant matters.

Most decisions involve a two-stage process. Can you do it? If so, should you do it?

The purpose of TKU is to help trustees cut through complexity and deliver on their basic duty, simply to pay the right amount to the right people at the right time.

Beth’s article was originally published in PMI’s Pensions Aspect Magazine, here (on page 38).