MNT arrangements – time for a re-design?
Trustee boards are required to design and operate member nominated trustee (MNT) arrangements which are appropriate for their scheme. Many boards diligently designed arrangements back around 2006 but have made only relatively minimal changes to them in the 15 years since.
However, trustee boards are required to review their arrangements from time to time (or after a material change) to make sure they remain appropriate and continue to reflect the Regulator’s principles of proportionality, transparency and fairness. A re-design can also enable trustees to take advantage of opportunities to refine and modernise their processes and ultimately improve the effectiveness of their board.
So what might trustees want to think about?
Reflecting changes in the scheme and/or its membership
If there have been big changes to the scheme, these should be reflected in the MNT arrangements. For example, if you’ve undertaken a big merger you may want to add a new constituency. If the scheme has closed to future accrual, and deferreds represent a material proportion of your membership, it may be appropriate to include them in the process if you haven’t done so before.
Moving with the times
As it was probably a few years ago, many schemes will have used solely postal processes for their last MNT selection. However, as life moves more online (particularly with the impact of the pandemic), we are increasingly seeing schemes adopting more flexible and electronic processes to help make it quicker and easier for members to apply to be an MNT. Online voting options could also have a big impact on participation in MNT elections.
Boosting the number of applications
Schemes which are struggling to get a good number of applicants should consider whether their process imposes any unnecessary barriers. For example, if you’ve previously required applicants to get a minimum number of sponsors, reducing or removing these requirements could allow more applicants to come forward. Particularly if you are seeking applications from deferred members and/or your pensioner population is no longer as well connected as it perhaps was in the past.
Getting serious applicants
As trusteeship is an increasingly demanding role, trustee boards need applicants of the right calibre and commitment. Giving members more information up-front about what the job requires should help applicants understand what they are signing up for and make a more informed decision about whether to apply. However, it’s important to strike a balance so you don’t put good candidates off. Communications should therefore highlight the available training and support as well as access to advisers.
Helping you make the right choice
If trustees use a selection panel, it’s essential that that their assessment process is well-structured, robust and transparent so they can properly assess and compare the applicants (and defend their decision if challenged). For example, assessment criteria and standardised interview questions can be helpful but these should be updated to ensure they remain relevant. Trustees may also want to ask for more information in the application form (for example, about why the applicant wants to be a trustee and their relevant skills and experience) to help them identify the strongest candidates.
Opportunities to improve diversity and mix of skills
Appointing new MNTs can potentially be a great opportunity to increase the board’s diversity and make sure it has the right mix of skills. Trustees should look at the way they communicate with members about MNT applications specifically from a diversity and inclusion (D&I) perspective and think about whether there are any changes they could make to help encourage applicants from a wider range of backgrounds. Trustees might want to seek feedback to help them identify ways they could make the role appear more accessible. The employer may also have D&I specialists who could support the trustee with this.
The Regulator’s draft new Code of Practice reminds trustees of the importance of succession planning. Trustees should be thinking about what’s coming down the track and how they can minimise the risk of the board losing a wealth of knowledge and experience at a key time. For example, if you have previously aligned your MNT’s terms of office, it may be helpful to move to a staggered approach so they don’t all stand down at the same time. Particularly if you are about to embark on a big project where continuity will be really helpful (e.g. GMP equalisation or significant investment changes). You might also want to consider the length of an MNT’s term of office and make sure it allows the board to maximise an MNT’s experience rather than them stepping down just at the point at which they have the most to contribute. Could a slightly longer term allow MNTs to see one valuation cycle and then play a more material role in the next? If the scheme is expected to buy-out and wind-up within the next few years, does it make sense to have a longer term of office to allow for the expected completion of the project?
Getting employer support
As being a trustee can require a considerable time commitment, potential applicants may be concerned as to how they would balance a trustee role with the day job. Trustees can remind members of their rights to time off to undertake their trustee duties. However, actively getting the scheme’s sponsoring employer involved in the recruitment of MNTs can be really helpful. They can reassure members that they will get the time and support they need to take on the new role and will be recognised for their work as a trustee. This should help applicants feel more confident to come forward in the first place, as well as ensuring the selected MNT can dedicate time and energy to the role throughout their term of office.
Trustee effectiveness is already a hot topic and it is only likely to move further into the spotlight with the introduction of the Regulator’s new Code of Practice. Many boards will inevitably be investing considerable time and effort over the coming year or so into improving their governance and effectiveness in order to keep pace with the continually rising expectations on trustees. Making time for a proper review and redesign of their MNT arrangements can help ensure they are working to support and enhance the trustee board’s efforts (rather than potentially undermining them).