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The Actuary The magazine of the Institute & Faculty of Actuaries

Trustee confidence levels drop

In a survey of UK corporate pension scheme trustees conducted by Watson Wyatt Investment Consulting, respondents universally assessed their investment capabilities and expertise as having fallen compared with a similar survey of two years ago. Kevin Carter, European head of investment consulting at Watson Wyatt, said: ‘It is perhaps not surprising that trustees in general are concerned about the level of knowledge and skills of their trustee boards and investment committees given the phenomenal increase in investment complexity during the past couple of years. This development, combined with a profusion of “solutions” on offer, has no doubt challenged trustees’ actual ability as well as their own perception of their ability.’

According to the survey, trustees have, on average, about 17 years of financial experience and nine years’ experience of trustee matters. However, 25% of trustees have less than five years’ financial experience and less than three years’ experience in trustee matters.

The survey, which covered 131 funds worth approximately £137bn and involving over 400 trustees, also revealed that the typical trustee body spends less than 24 hours per year discussing investment issues. In partial contrast, Tom Powdrill of the TUC expressed optimism about the position for trustees: ‘I think there’s also a bit of a shift going on in terms of the balance of power within pension funds. I think particularly fund managers in the past probably felt that their primary focus was maybe on the investment consultant rather than the trustee board, getting onto the consultants buy list and so on was probably the key relationship they had to manage. I think what you’re seeing, particularly as a result of the Myners Review, is the position of trustees is becoming strengthened and that kind of relationship, the kind of relationship between the actuarial consultant, the fund management and the trustee is changing slightly. I think in the future fund managers will probably think more about relationship with the trustees than they have in the past.’