With the government introducing new reforms to boost the pensions industry, struggling pensions schemes have had to turn their focus to governance and administration, following the new, strict guidelines as issued by the Pensions Regulator in order to ensure good member outcomes. As part of this education drive, the role of the trustee has been redefined and its importance highlighted; accountability for administration in trust-based pension schemes lies with trustees. While trustees may choose to delegate responsibility for administration, they retain ultimate accountability. The pressure is immense, and now with competition emerging between independent and professional trustees and already existing committees of lay trustees, there is concern that conflicts of interest might scupper the efforts of floundering schemes.

Firstly, it is important to consider the kind of trustee the sponsoring company or scheme will need. Some schemes hand over sole responsibility to an independent trustee who might be working for several schemes at once. This means that the independent trustee is working on a market-led research basis, guaranteeing impartiality. A regular salary ensures that this is a job, rather than an outlying responsibility. Other schemes might prefer to employ an independent trustee as a consultant to an already existing team of lay trustees, either to manage them directly or provide guidance according to their own internal policies. Another method would be to consider separate investment consulting advice before putting investment strategy proposals to the trustees.

It is important in each case to establish levels of responsibility; if the independent trustee is to have a managing role, it is important that the team is able to take instruction. It is also worth considering that some conflicts of interest may arise from the fact that certain lay trustees will also be benefactors of the scheme they are helping to administrate. Vested interests will need to be monitored and all discussion will need to be strictly in the interest of the scheme and its members. Payment is also a factor; in order to ensure good outcomes, it is important that pay is regulated according to the level of expertise and responsibility of the trustees. This is particularly important in the case of lay trustees, many of whom work outside of other job positions to offer their services. Whilst still required to display appropriate knowledge, in order to lessen the burden and establish a diplomatic working hierarchy, pay should be regulated according to a system appropriate to the scheme and its mix of independent and lay trustees. So, for example, it might be of best interest to pay lay trustees on a task-specific or hourly basis, according to meetings attended. It is essential that in all areas of administration, conflicts of interest are kept to a minimum, and good monitoring and in-house regulations will ensure that these are identified and avoided wherever possible.