The TUC launched a report yesterday (researched and written by me) looking at the decline of member voice in pension trustee boards. Member representation is declining not because anyone made a conscious decision to remove member trustees. It is the result of changes in the pensions landscape.
The erosion of member voice is mostly structural. The rules that introduced member nominated trustees still exist for many trust-based schemes, but a growing number of savers are now in arrangements where those rules don’t apply. Scheme consolidation, the growth of multi-employer, accelerated LGPS pooling, and a rise in sole corporate trusteeship all reduce the number of boards that include member representatives.
Government still recognises that lay trustees bring a unique set of skills; they ask questions others might not ask, challenge assumptions, and help keep discussions grounded in how decisions affect members.
The original rationale for member representation also remains. Representation safeguards against conflicts of interest, nepotism, risky decision making, and weak scrutiny.
The current rationale for inaction is that large multi-employer schemes do not have a clear or stable membership base, and it becomes harder to anchor trustees to a defined group of members.
Looking at other countries shows that there are ways around this. In Denmark and the Netherlands, representation is anchored in sector organisations and unions rather than individual employers. These bodies define the membership base, which makes it possible to maintain representation even in large multi-employer schemes. A similar system here would require strengthening the relationship between unions and schemes, but this is not an impossible ask.
Some systems add additional structures to channel member views. Dutch funds use accountability bodies and sector committees to provide feedback and scrutinise board decisions. This layer is quite important for representing larger, more disparate bodies.
Representation in large schemes also requires proper, mandated support. Member trustees need comprehensive induction, ongoing training, and clear briefing on technical issues. Board culture matters as well. Chairs who actively invite challenge make it much easier for representatives to contribute. Peer networks and mentoring help people build confidence in the role. These requirements could form a part of the government’s current review of pension trusteeship.
The UK pensions system is moving rapidly towards scale. That makes the question of how member voice operates in large schemes more important, not less. The TUC report sets out how representation could continue to play a meaningful role, and the TUC is asking the government to require multi-employer DC schemes to include at least a third of member nominated trustees on their boards.
www.tuc.org.uk/sites/default/files/membervoiceinpensionschemegovernance.pdf
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