The Government's Green Paper "Security and sustainability in defined benefit pension schemes" is currently out for consultation.
The Association of Member Nominated Trustees (AMNT) has held consultation sessions at its member conferences.
We have just over 700 members, who represent some 500 schemes, with total assets under management of just under £700 billion.
We say that is around one third of the UK occupational pension sector.
We are, therefore, a big representative body. In addition, I have attended several round table discussions on the Green Paper that the Minister of Pensions himself has conducted from across the industry. These operated under Chatham House rules.
With the deadline for responses set for 14 May, I set down here some of the headline conclusions and debates that I see emerging.
Are defined benefit pensions still affordable?
The weight of opinion seems to be that defined benefits (DB) are not in a state of crisis.
It is possible that some less responsible employers might wish to suggest otherwise as cover for trying to weaken their commitments, but these should not be encouraged. That is not to say that problems do not exist with DB pensions.
Some consultees add that we should not forget that many employees now call on several pensionable jobs, often with different employers, during their working lives.
What should be the role of trustees?
I find widespread support for the idea that the governance of pension schemes may be likened to a triangle.
The three sides can be represented as: (1) the sponsoring employer; (2) the consultants and fund managers who work to increase the assets; then (3), most importantly, the scheme members themselves, supported by their nominated trustees.
These three should be kept in balance. Consultees from a range of backgrounds note that there is increased appreciation of the value that member nominated trustees (MNTs) bring to scheme governance.
Specific points mentioned include: risk management, employer covenant assessment and costs & charges.
The quid pro quo is that MNTs should have appropriate levels of knowledge and understanding. Some technical knowledge is needed.
Many see as of equal importance the skills of a non-executive director in holding experts to account. MNTs should figure also in the governance of mastertrusts - good practice certainly demands this.
Is new legislation needed about informing members of their schemes' financial position?
Whilst new legislation is not generally seen as an answer, there is however, a dichotomy between the short term and the longer term.
In the short term, many trustees report that their members are not generally assiduous readers of scheme literature. In any case, there is some support that a little knowledge can be a dangerous thing.
In the longer term, we will want scheme members to have faith that their schemes have sound financial management. They will need to read about this if we are to encourage them to invest a higher percentage of pay to secure income in increasing number of years in retirement.
In conclusion
This progress report is inevitably impressionistic.
Although the full results of the consultation are yet to come in, I detect general agreement that the Pensions Minister, Richard Harrington, is conducting a genuine consultation. It is open minded in the best traditions of Green Papers and consultees generally welcome his thorough approach.
Written by David Weeks, Co-chair of the AMNT.
