15 August 2020
The Pensions Authority is currently reviewing the issue of trustee qualification. In 2015, the Authority sought submissions on a number of questions in relation to trustee qualification. Aspects include the voluntary or mandatory nature of trustee qualification and the interaction with forthcoming developments under the IORPS II Directive. The Pensions Authority recently published a synopsis of the responses which it received. The main question focused on whether trustee qualification should be mandatory and the responses received were split almost 50/50 for and against mandatory trustee qualification.
Synopsis of responses
Those in favour of a mandatory approach argued that this would improve the quality of trusteeship, especially where the technical nature of the trustee role is becoming more complex. It was suggested that mandatory qualification should only apply to professional trustees, defined benefit (DB) schemes or defined contribution (DC) schemes with a total fund value of over €5 million. A query was raised as to whether mandatory qualification should apply to the trustee group as a whole rather than to individual trustees.
Those who opposed mandatory qualification raised concerns over its impact on the large number of one member DC schemes. It was also noted that lay trustees bring considerable value to trustee boards and can be a vital link between the scheme and its members. If qualifications were to be imposed, such qualifications would be unduly onerous, costly and time consuming and may result in existing trustees resigning. The pool of eligible trustees would therefore be reduced.
The other questions followed on from the main question of mandatory qualification. For example, the questions discussed whether grandfathering should apply if mandatory qualification were introduced. Again the responses were split between those believing that members could be left without trustees if they were forced to resign and contrary responses believing that all trustees should possess the same core qualifications. Suggestions were made on how any such grandfathering should be offered and managed.
On the question as to whether exemptions should be made from examinations for existing relevant pensions related qualifications, there was consensus that a range of professions and qualifications should be fully or partially exempt. It was suggested that the curriculum proposed by the Authority was heavily focused on the legal aspects of trusteeship and the focus should be on general administration of pension schemes, such as improving member communication. A considerable amount of additional topics were also proposed. The responses also reflected that due to the different nature of DB and DC schemes, different requirements should apply.
Finally, the respondents suggested that the Authority should perform a regulatory impact assessment and cost/benefit analysis when considering the impact of the proposed changes, and whether it would be money well spent in the absence of data showing that professional trustees secure better outcomes for members.
A higher level of professionalism
It does not appear to be the case that the Pensions Authority would like professionals to replace trustees, rather it would seem that the Pensions Authority may be looking for a higher level of professionalism in how trustee boards conduct their business. The Authority will now consider the points raised and this will influence how the proposals on trustee qualification will proceed.