As I reach six months with ITS (and the end of my probationary period!) I find I am asking myself…why did I join ITS?! Having spent the previous 20 years in senior in-house pension roles I was looking for a new challenge but one to which I could bring that experience.
I was delighted that ITS not only shared my views on what I call “the retreat of the Pensions Manager” but that, following the ITS team’s Management Buy-Out and in line with their ambitious growth plans, they were prepared to back me and themselves to grow what we are calling our Trustee Governance Office.
This being alongside ITS’s well established and respected Professional Trustee practice. The fact that ITS already had an experienced Trustee Support team in place was an added bonus.
The other reasons for joining are more subjective and no less important – the people and collegiate approach allowing us all to tap into the wide range of experiences the whole ITS team can bring.
I am pleased to say the reasons for joining remain the same and have been reinforced. So, what do I mean by the retreat of the pensions manager?
For some time I have been considering the structural challenges facing in-house trustee support teams both from the perspective of the teams themselves and the sponsors that employ them; and in turn how this impacts trustee boards.
I felt this issue was important because in my experience the in-house pensions manager provides more to a trustee board and sponsor than just the “licence to operate” governance framework, but also delivers an executive function that facilitates execution of trustee and sponsor business and strategy.
The structural challenges I have identified (and there may be more which are often scheme and/or sponsor specific) centre around managing the Defined Benefit legacy and the implications that flow from that.
We now commonly see a closed Defined Benefit scheme with a long-term funding target and journey plan in place. Future pension provision is often through a DC Master Trust or Group Personal Pension with attendant changes in the sponsor’s and pension manager’s focus in terms of time commitment and financial investment. This can lead to:
Overlaying this is sponsor action or initiatives, for example a merger of legacy schemes reducing executive governance requirements and raising expectations for cost savings. Whilst at the same time there continues to be focus on governance from the Pensions Regulator and wider stakeholders.
I remain an advocate for a well-resourced in-house team, but for many these structural challenges will inevitably bite over the coming years and may be accelerated in the light of recent events.
Nevertheless, the need for both trustees and sponsors to support the DB legacy will remain for some time to come. I believe that the solution to this will be a partnership with an experienced and well-resourced professional provider to execute delivery of strategy, maintain the governance framework and provide resilience and continuity for the lifetime of the scheme, as well as adapting the support required as the scheme executes its journey plan.
This partnership will perhaps develop in a number of ways from initial interim support to co-source; and then to a fully outsourced basis.
Whilst I have focused on the challenges facing in-house teams there are many schemes that have something far less formal in place and/or gaps in their governance support that often only come to light too late. I will be considering the challenges here in another thought piece.
+44 (0) 20 3786 6251 (Georgina Milton)
+44 07788 491 582 (Ian Terry)