Skills and knowledge gaps are affecting pension trustees ability to make confident investment decisions, Mercers 2013 pensions governance survey has revealed
The consultancy surveyed a total of 197 UK defined benefit schemes, with combined assets of over £450bn, more than 1,000 individual trustees and some 3.5 million members. It found that only 61% of participating trustees felt their board was sufficiently confident in making decisions on investment strategy, 64% were confident negotiating funding valuation outcomes and 74% were confident in assessing the strength of the sponsor covenant.
Amongst those who acknowledged a lack of confidence in decision making, two-thirds (66%) put this down to gaps in their skills and knowledge, while almost a quarter (23%) cited lack of time devoted to discussion.
The survey also revealed that only 56% of boards required trustees to complete The Pensions Regulator's Trustee Toolkit, a free online learning programme that has been developed to help trustees meet legislative requirements for prescribed levels of knowledge and understanding.
Clare Owen, Mercer's UK leader for governance and trustee services, said it was 'surprising and disappointing' that a large proportion of schemes were not committed to putting their trustees through the Toolkit.
'It is essential that quality time is set aside by boards to either complete the Toolkit or to undertake appropriate regular training to enable trustees to be competent and confident in their trustee role.'
She added: 'The lack of confidence in decision making amongst trustees often leads to delays in implementing change, new innovations or solutions to address the complex challenges associated with scheme financing. The result is higher costs for scheme sponsors.
'To capture new innovation and best practice in implementing financing solutions trustees needs to work more closely with their scheme sponsor and consider delegation of some decisions to external advisers and professionals.'
Elsewhere, the survey highlighted the number of trustees who were not paid or not paid fairly. Only half of schemes pay the chair of trustees. Of those chairs who are not paid, most are active members or senior employees of the sponsoring employer.
Mercer noted that, in order to get people with good leadership skills and the right knowledge base, 'rewards should commensurate with the professionalism expected'.
Owen said: 'It is difficult to insist on the highest standards of commitment, competence, and contribution when there is no remuneration or no fair remuneration. If people are paid fairly, they can expect to be held to account.'