Trustees of the U.K.’s largest pension plans are rarely getting their views “in the corridors of power,” according to a report by pensions consultancy Lane Clark & Peacock.
The majority of workplace retirement savings in the U.K. – over £1.2 trillion ($1.5 trillion) - currently sits in defined benefit plans, overseen by trustees.
The LCP report highlighted that DB pension assets are hugely concentrated, with just 50 plans (out of more than 4,800 plans) accounting for half of all DB assets. Decisions on how that money is invested are taken by fewer than 500 trustees across those plans, the report found.
Following interviews with professional and member trustees, LCP found that trustees can be hugely influential in determining how pension plan assets are invested and in setting the endgame from the range of alternatives now available, though the nature of that influence can vary from plan to plan.
Despite this influence, these ‘pension powerbrokers’ told LCP that their voices were often not heard when it came to influencing government policy.
According to the trustees, government ministers regularly meet with representatives of the pensions industry, asset managers and insurance companies, but rarely have face-to-face meetings with the trustees who actually decide how money is invested.
The majority of professional pension trustees said that non-professional member trustees, nominated by the plan membership, add great value to a trustee board. Member trustees could ask ‘common sense’ questions about technical material, and often bring a deep understanding of the company and of the needs of the scheme membership.
Steve Webb, a partner at LCP and former U.K. Pensions Minister, said in a news release: “The government is keen to see pension plan assets across the pensions landscape invested in a way which will generate higher levels of growth in the U.K. economy. But any reform will be ineffective if it is not grounded in a full understanding of the role and attitudes of trustees.”
Of those interviewed for the report, there was a strong view that trustee boards are at their best when they are diverse and a range of perspectives are heard around the table. Respondents also warned of the danger of ‘groupthink’, where different voices are not hard and dominant opinions are not challenged.
