28 July 2010 – Publication of DWP research report 670: Attitudes to increasing the proportion of member-nominated trustees: A qualitative study

Research is published today by the Department for Work and Pensions which presents the findings from a qualitative study that explores attitudes to increasing member-nominated trustee (MNT) representation on pension scheme trustee boards from the perspectives of employers, pension scheme trustees (MNT and employer-nominated trustee (ENT)) and trade union representatives.

Trust-based pension schemes are required to have at least one third of the board of trustees as member-nominated trustees (MNTs) or member-nominated directors (MNDs).^[Footnote] This requirement was introduced in recognition of the fact that involving pension scheme members in the selection of trustees could help to ensure the successful running of the scheme in the interests of all scheme members. This requirement was brought in by the Pensions Act 2004, along with provisions for increasing the proportion of MNTs to 50 per cent. These provisions have yet to be put into effect.

The main findings are as follows:

• The requirement to provide for at least one-third MNT representation generally has been welcomed, despite difficulties in recruiting trustees.
• A proposed move to 50 per cent MNT representation is generally seen in a positive light by MNTs and trade union representatives.
• Support for 50% MNT is less evident amongst employers and ENTs.
• Some employers were actively opposed to any such measure, suggesting that if such a rule were introduced they would consider closing their scheme.
• Schemes that already have 50% MNT feel that it is valuable and that scheme governance is enhanced.
• Respondents generally feel they could meet the 50% MNT requirement if it was introduced but were concerned about practical considerations:
  • there would be difficulties with recruiting 50% MNT due, in part, to perceptions of the role and its responsibilities;
  • it would increase the need for training and support, to ensure that MNTs can confidently play a full and valued role on the trustee board;
  • maintaining expertise on the board may be more challenging given the possible lack of immediate knowledge held by a newly appointed MNT;
  • there could be increased tension between ENTs and MNTs over a perceived lack of trustee skills; and
  • it would require a marginal increase in costs (covering recruitment, training and support, administration and time costs) although these were not perceived to be particularly onerous.

Notes to Editors

1. The research report “Attitudes to increasing the proportion of member-nominated trustees: a qualitative study” is published on Tuesday 27 July 2010 and is based on research carried out by BMRB Qualitative Research.
2. The research involved 61 face-to-face depth interviews with employers, member-nominated trustees, employer-nominated trustees and trade union representatives from across England, Wales and Scotland. These groups have key roles in the running of occupational pension schemes and interviewing representatives of these groups allowed for a full range of views and experiences to be explored.
3. The interviews lasted around one hour, were structured using topic guides and were conducted between July and October 2009.
4. In order to provide a broad cross-section of pension scheme trustee boards, schemes were selected on the basis of a) type of pension scheme (Defined Benefit and trust-based Defined Contribution) and b) size of pension scheme (number of members)
5. A number of schemes were excluded from the research, as follows: schemes with 12 or fewer members; public and church sector schemes; contract-based DC schemes; pension schemes closed to existing or new members, frozen or in the process of being wound up; and, pension schemes where the sponsoring employer was in administration.

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Footnote. Should a pension scheme be governed by a trustee company, one third of the directors of the company must be MNDs. For the purposes of this study only MNTs were interviewed.