Head-on collision of interests

The challenge of setting up independent pension trustee boards is an uphill task.

Any hopes of making progress were dashed today, reading the latest findings from Trustee GAAPS. Only one third of pension trustee boards of FTSE 100 companies are independent, according to the trustee search firm.

Out of the remaining two thirds, 50 per cent are directors or senior managers of the company that funds the scheme, and the other half are ex-directors. Most trustees are still finance directors of the sponsoring company or their colleagues.

Since the role of a trustee is to protect the interest of pension fund members then how can a non-independent trustee act in the interest of both the scheme member and the employer without a conflict of interest?

A company director has a legal duty to act in the best interest of shareholders, which may mean keeping company pension contributions to a minimum. But a trustee also needs to protect member interests and that could mean negotiating increased funding from the employer.

 David Johnson of Trustee GAAPS describes this impossible position as a zero sum game when it comes to decision making for the scheme. And well he may. At a bare minimum, the chairman of the trustee board should be independent.  A little help is needed, he says, calling for government to make it mandatory that a chairman’s role should be independent.

The worrying thing is that FTSE 100 pension schemes are more likely to have better standards of corporate governance than smaller ones. With these results it’s not an encouraging outlook for independence.

About the blog

FTfm is no longer updated but it remains open as an archive.

FTfm's specialist writing team offer their insights into the global fund management industry.

About the authors

Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.

Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.

Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.

Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.