All trustee boards delegate some of their tasks to various parties but they retain ultimate responsibility for the administration of their scheme. We set out some key governance elements for trustees to consider in respect of these delegations : Authority, Which Powers, Discretions, Records, Terms, Reporting and Conflicts.
Although trustees retain the responsibility for the full administration of their pension scheme in line with the rules and legislation, no-one expects trustees to personally undertake all the tasks themselves – indeed the Pensions Regulator’s Trustees Roles and Responsibilities guidance (http://www.thepensionsregulator.gov.uk/trustees/role-trustee) starts off with confirming that trustees can use their powers to delegate some functions.
There may be a number of different parties to whom different roles are delegated by the trustees depending on the scheme such as scheme secretary, administrator, employer payroll department, IDRP contact, sub-committees (which may be joint with company representatives or have non-trustees generally co-opted onto them), advisers, consultants and perhaps a specific trustee from the board.
Here are some key governance elements we recommend that trustees consider in respect of the delegation of tasks for the administration of their pension scheme:
- Is it permitted?
Most trustees have a general (and sometimes specific) power of delegation contained in their scheme’s governing documentation but it is always advisable to check and/or have this confirmed.
Usually these powers permit delegation of any powers, duties or business including the exercise of any discretion or the formation of any opinion to any one or more of the trustee board or to any other person or persons as they deem necessary or desirable for the execution of their powers and duties under their scheme.
Trustees should also check or have confirmed if there are any conditions which apply to the power to delegate.
- What powers do the trustees have?
This is linked with the Trustee Knowledge and Understanding (TKU) conversance requirements – trustees should have an understanding of their governing provisions, which includes which powers they hold, either solely or jointly with another party (such as the employer).
Some trustee boards prefer a full conversance guide to assist with their scheme TKU but others find a summary such as a Balance of Key Powers table is sufficient for their governance purposes.
Following on from the powers above, some trustee boards find a governance paper setting out a list of their specific discretionary powers under the Scheme governing provisions useful together with note of any corresponding policies (eg regarding pension sharing on divorce).
- Trustee Records/Transparency
We recommend that trustee boards keep a register of what delegations and authorisations have been agreed which can be reviewed regularly at trustee meetings as part of the trustees’ governance timetable.
Often additional information or related parameters can be retained as part of these records such as limits on authorisations (eg if their administrators are authorised to process certain member requests up to a financial limit without obtaining specific trustee consent).
- Terms of Delegation
Some delegations may be simple and not require specific written and agreed terms, such as agreement that one member of the trustee board will meet with a third party and report back to the trustee board or the scheme secretary will submit the scheme return on behalf of the trustee board.
Others may have their terms set out in their formal engagement terms with the trustee board, such as a consultant, legal adviser or administrator. These should be checked to ensure there are sufficient for purpose. Reviews of these will form part of the trustees’ advisers reviews element of their governance internal controls projects and overall scheme timetable.
For sub-committees, trustee boards and those on the sub-committee often find it is useful to have agreed formal terms of reference for that sub-committee to set out the parameters of the role of the sub-committee and reporting etc. This can be particularly useful for joint employer and trustee sub-committees working on specific projects.
- Reporting Lines
Depending on the delegate’s terms of reference and specific roles, there needs to be agreed reporting lines which may include liaising between different advisers (such as the actuary and the administrator). The trustee board needs to receive sufficient information to be satisfied that both the delegate is undertaking the tasks in line with the agreed conditions and also that the tasks are being undertaken correctly – don’t forget the trustee board retains the ultimate responsibility.
- Conflict of Interests
Delegates should be made aware of the scheme’s conflict of interests policy and be requested to confirm any potential conflict of interests position, regular review of the position and if necessary an explanation of any arrangements established to manage a potential conflict.
Many professional advisers will have their own conflict of interest policies which will need to be reviewed and agreed by the trustee board.
For more information or assistance with this (or any other) element of your scheme’s governance, please contact any member of the Irwin Mitchell pensions team.