The document discusses several issues related to pension trustee skills, capability, and culture in the UK. It addresses questions about trustee knowledge standards, whether trustees currently meet expectations, barriers to improving capability, investing in a broad range of opportunities, consolidating schemes, registering trustees, accreditation requirements, defining professional trustees, investment decision support, the impact of legal advice on decisions, exercising fiduciary duties, seeking best returns, and balancing returns, costs and services. The responses indicate that while trustee standards are generally high, the proliferation of schemes limits their ability to improve member outcomes. Barriers include a lack of time and incentives that prioritize compliance over diversity of voices and investing more broadly.

1. Here are Age Wage’s responses to the DWP's call for evidence on
Pension trustee skills, capability, and
culture
1. Do trustees know what the knowledge and understanding standards expected of them
are? The standards of training, knowledge and understanding of UK pension
trustees is generally high, but the proliferation of schemes makes their capacity
to improve member outcomes limited. Most trustees do not have the time to do
the multiple jobs they are asked to do, whether that be trustees for multiple
schemes or take on pension work as an ancillary activity to the day job.
2. Do trustees currently meet the knowledge and understanding requirements expected
of them? Are some types of trustees better than others? There are arguments for lay
trustees (diversity and common sense) and for professional trustees (expertise). If
compliance is paramount then professional trustees are “better”, if we take
diversity seriously, we must allow for the voice of amateurs.
3. What are the barriers to improving trustee capability? What do you think government
should do to ensure that all trustees meet the standards expected of them? Does trustee
liability put off potential trustees? Trustee liability is rarely tested, very few
trustees have been sued over the past thirty years and the regulator’s limited
capacity to bring errant trustees to count suggests that they have “powers” but
not power.
4. Do trustees (including Master Trust trustees) have the right knowledge and
understanding to invest in the full breadth of investment opportunities? If not, what
can be done to improve this? Trustees do not originate investment strategy, they
approve (SIPs) and monitor it (implementation statements). They do not stand in
the way of broadening investment opportunities; the problems lie elsewhere.
Trustees must be released from the servitude of the AMC and the DB funding
code and be allowed to invest with less constraints. This is not just a matter of
the charge cap, it is a function of the market-place, commercially successful DC
schemes prosper from low charges, that needs to change for trustees to invest
more broadly. A comparison between the constrained behaviours of DC and DB
trustees in the private sector and the fund committees of the LGPS is instructive.
5. Is there enough understanding of advice around the consolidation of schemes?
Trustees are typically proud of their work and an admission that a scheme is not
providing VFM to the sponsor and more importantly members, is hard for them
to make. The low level of compliance amongst trustees of DC schemes with less
than £100m in assets suggest that the trustees of small DC occupational schemes

2. are unwilling to consolidate. It is not a matter of understanding; it is a matter of
incentives. Turkeys don’t vote for Christmas
6. Do you think that the government should require all trustees to provide information to
enable TPR to keep a register of all trustees? It is very odd that this does not
happen already. Scheme returns should include an up-to-date list of trustees in a
format that allows the information to be readily transferred to a digital register.
That register should be as accessible as the lists of Directors to be found on the
Companies House website. In a single word “yes”.
7. If the government were to require this information, would it be best achieved through
the scheme return or through a separate trustee return? The scheme return
8. Do current accreditation frameworks provide a high enough bar to equip trustees who
become accredited to properly fulfil their role, including in making investment
decisions? The commercial imperative to raise the bar for trustees comes from
the commercialisation of the trusts themselves. Active company pension funds
are now sufficiently rare for their trustees to be required to justify their on-going
existence. What is more worrying are inactive plans, particularly DC plans,
which are little considered either by the sponsor or the regulator. These should
be the principal target for consolidation as this is where the worst standards of
governance are found. Locating and consolidating small schemes is a task for the
VFM Framework and won’t be solved by better accreditation of trustees.
9. What proportion of your trustee board are accredited trustees? I have no idea, we
save into Nest – is this a metric that sponsors or members are expected to have
access to?
10. If we required each scheme to have a certain proportion of accredited trustees, where
should this bar be set? Should Master Trusts be required to have a greater proportion
of accredited trustees than single-employer schemes? I think that schemes should be
required to have equally good governance whatever their commercial plans.
Ideally, all trustees, including lay-trustees should be accredited. We assume TKU
would ensure that accreditation was a low-bar.
11. Should there be more rigorous requirements for those acting in the capacity of a
professional trustee? What sort of requirements/standards should professional trustees
be meeting? Should there be mandatory accreditation? These questions are difficult
to answer, they assume we have a benchmark and a rulebook. That is fine for
contract-based arrangements but trying to impose standards and rules on

3. trustees, rather defeats the point of the broader concept of the fiduciary duty.
Government should be wary of over prescriptive approach in this area.
12. How would you define a professional trustee for the purposes of legislating for all
professional trustees to be accredited? A trustee who plies his expertise for money
13. What are your observations on the external support trustees are given to make
investment decisions, particularly in relation to unlisted equities? Investment
consultants can provide this support but few do, in general DC investment
consultancy is pitched at the problem funders have, which is to ensure that what
remains of the AMC after pay-away to fund managers, is sufficient to make the
scheme prosperous. Most DC consultancy is run on a tight budget that does not
allow for supporting difficult investment decisions.
14. What changes could be made, including to the regulatory environment, to improve
trustee support in relation to unlisted equities? We need fewer schemes which
compete for long-term value and are assessed for VFM not just “M”. Trustees
should look to the LGPS for such an environment.
15. To trustees: To what extent do trustees use investment consultants to support
decisions around allocations to unlisted equities? Did they subsequently increase? Is
there a deficiency of knowledge or expertise by investment consultants of these types
of investments? N/A I am not responding as a trustee.
16. What changes could be made to investment management to support pension scheme
investment decision-making? Greater transparency on valuation policy, overt and
covert fees and gating. Daily liquidity shouldn’t be required but clarity on the
redemption policy would be helpful for trustees.
17. To trustees: How does legal advice impact on your investment decisions? What is an
acceptable level of tolerance for investment risk? Is there a culture of ‘risk aversion’?
n/a
18. Is fiduciary duty a well-understood concept? Do current regulations and guidance
support trustees to make investment decisions which seek higher returns for
members? If not, what changes would be useful? Fiduciary duty is generally
understood to be about protecting members from harm, not about finding
opportunities which are valuable. We take the “change of mindset” requested
from TPR to be about encouraging value. We note however that the risk
aversion that TPR is complaining about is as a result of decades demanding risk

4. reduction from the same TPR. It is important that TPR’s guidance makes it
clear that fiduciary duty works both ways.
19. Do trustees currently make investment decisions in the long-term interests of pension
savers? If not, what barriers are there to trustees making investment decisions in the
long-term interests of savers? No, they don’t, most trustees consider the downside
of risk taking but too rarely the upside. The barriers are partly behavioural but
also the fear of criticism from regulators, press, sponsors and members,
20. How do trustees balance investment returns, costs and charges, and services when
making decisions in the long-term interests of savers? With difficulty. What is
required is a net performance measure which takes into account the member’s
experience. We recommend the use of member calculated IRRs, benchmarked
against the common experience of members
21. Do trustees’ fiduciary duties discourage investment in alternative asset classes? If so,
please explain with examples. No, they don’t, they simply reinforce the need for
high quality trustees
22. Is the way in which trustees exercise their fiduciary duties preventing trustees from
seeking the best returns for pension savers? If so, what is causing this? Yes they are,
trustees are required to execute strategies that are proposed by funders meaning
that too often, they have to implement sub-optimal strategies that take little or no
risk.
23. Do those actors who have most influence on advice to trustees on long-term
investment decisions experience any cultural challenges or barriers in provision of
their advice on illiquid assets? If so, what would unblock this? Most investment
consultants and lawyers advising trustees, do so with an eye to risk. In DC the
risks to trustees are clear, liquidity, reputation and most importantly – detriment
to members. Successive problems with the gating of property funds, Woodford
and the perception that there are “hidden fees” in illiquid investments, have
meant these advisers err on the side of caution. Especially in DC, where the
thrust of this consultation is directed, this has meant that where good ideas are
put forward, they are rarely adopted. The LTAF will do something to move the
dial but not enough. Behind the caution is the commercial reality that VFM is
still perceived as residing in the headline AMC. So long as this perception
persists, most DC schemes will not adopt illiquid assets, we will have to wait for
consolidation to happen for that to change.
24. Would trustees find it helpful if they received more direction from regulators when
assessing their investment decision making? In addition to our work on Value for

5. Money we are also interested in whether the advice for trustees provided by
regulators via training and guidance supports our objective to shift the focus
from cost to value? This would be helpful, we need more than training, we need a
new “mindset” from both trustees and regulators. Do not underestimate the time
and effort it takes for that to happen
25. Do lay trustees have enough time and support to perform their duties effectively? Do
professional trustees? If not, what changes would support this? The answer is
generally “no”, we need fewer schemes with better fiduciary budgets.
Henry Tapper
Executive Chair
AgeWage Ltd. 29th
August 2023