TPT calls for stronger safeguards to protect members in response to DWP trusteeship consultation

With government policy accelerating scheme consolidation, TPT warns that governance frameworks must evolve to match such scale, complexity and emerging risks that come with this – particularly with the creation of larger, and often commercially-owned, ‘megafunds’.

TPT supports a balanced approach to reform, recognising the vital contribution of the expertise brought by professional trustees while emphasising the continued importance of the member voice.

However, TPT cautions that growing commercial pressures within the professional trustee market risk undermining independence. Private equity ownership structures, cross-selling bundled services, adviser-trustee dependencies and restrictive tendering practices are increasingly prevalent.

Because of this, TPT is calling for clearer regulatory controls, including restrictions on self-appointment, requirements for independent tender processes and limits on bundled commercial arrangements.

The leading workplace pension provider also highlights the need for greater scrutiny of the wider governance ecosystem, particularly the largely unregulated adviser and consultancy market, given the close commercial dynamics between advisers and trustee firms.

At the same time, TPT emphasises that any reforms should carefully preserve the distinctive contribution that lay trustees make to pension scheme governance. Lay trustees often bring a breadth of professional and lived experience, and a closer understanding of the employer and membership, which can be difficult to achieve in certain structures, e.g. master trusts.

As schemes consolidate it will be important to ensure these qualities are not lost. Member panels and other channels to facilitate member and employer representation will need to take an increasing role to ensure a balanced and informed approach is taken to decision-making.

TPT notes that the rise of megafunds will heighten systemic and conflict risks. Trustee independence from scheme funders will become increasingly important, alongside stronger technical capability and clearer mechanisms for embedding member perspectives in decision-making.

Ruari Grant, Head of Policy at TPT Retirement Solutions, said:

“Trusteeship is one of our longest standing and effective governance models, and this consultation addresses the key evolutions in the market to make sure it remains the model that scheme members can have faith in. Consolidation has the potential to strengthen outcomes for savers, but it also increases the importance of robust and independent governance, as well as the expertise to manage ever larger and more complex strategies.

As schemes grow, and as those providing trusteeship move from an independent, non-profit basis to a more commercial one, policymakers must ensure the right safeguards are in place to make sure trustees are able to act in the best interests of their members, without influence from either commercial providers or trustee firms.”

TPT looks forward to continuing to engage with DWP as the consultation process progresses.