Providing value to defined benefit members

Neither the corporate sponsor nor those involved in the pension scheme should consider the apppointment of a professional independent trustee to a defined benefit pension scheme as just an added expense. A professional independent trustee can provide significant value for the scheme members through working with the existing trustees and even the scheme sponsor.

Supporting existing trustees

The existing trustees may need support to create and maintain an integrated funding and risk management plan, or they may just not have enough time or experience to deal with the pension scheme. They may also need to keep their trustee knowledge and understanding up to date, particularly in relation to investment.

A wider perspective on performance and cost

The scheme may have existing adviser performance and cost issues that need managing. With knowledge of the industry, the adviser market and service providers, a professional independent trustee will be able to review the existing advisers and if need be, align more appropriate advisers to the type and size of scheme providing cost savings.

Finding a way through

A professional independent trustee can lead negotiations and ensure there are no conflict issues. Conflicts of interest are a particular issue for employer-nominated trustees during pension scheme funding and recovery plan negotiations, or during a corporate deal that might impact the strength of the employer covenant. It is important that the company does not have undue influence on the trustees' decisions in these circumstances or when there are fundamental changes to the pension scheme benefits.

A positive investment

Sponsors of small to medium size defined benefit schemes may be particularly sensitive to paying fees for a professional independent trustee to support the existing trustees and trustee boards. However, making such an appointment can offer both the employer and lay trustees peace of mind to the existing trustees and trustee board that they are fulfilling their duties and for the employer as the sponsor that the scheme is being managed responsibly by the trustees. It can be a positive investment both emotionally and financially for all.

Smith & Williamson Trust Corporation Ltd provides independent professional trustee services particularly to small to medium sized defined benefit schemes with up to 1000 members, and under £50m in assets.

How we can help

We are appointed to assist existing trustees and trustee boards to ensure the efficient running and administration of their defined benefit pension schemes, while offering support in establishing good governance procedures. We work as a team with the existing trustees, bringing our professional knowledge and expertise while at the same time recognising the most valuable role the existing trustees have to play, their knowledge and history of the scheme and their relationship with the current members.

We can also be appointed as sole professional trustee to the pension scheme, if the trust deed and rules allow, where the existing trustees wish to resign or retire from the scheme.

We have experience and knowledge within the financial services industry in general, which helps us to make informed decisions in conjunction with other professional advisers. This enables us to ensure that we are acting in the best interest of all members under a scheme.

We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014. code: 14/989 expiry: 28/02/15