The great trustee exodus: two in five professional trustees plan to step down from their role within a year

by | Nov 24, 2022

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Professional trustees play a critical role in the world of defined benefit (DB) pension schemes. However, the industry may be facing a retention crisis as 80% of professional DB pension trustees plan to step down from their role within 3 years, according to new research from Charles Stanley Fiduciary Management.

This is an increase from 62% of pension trustees who said the same in Charles Stanley’s inaugural research last year. Should this exodus intention bear true, pension schemes will find themselves with a sudden gap in professional oversight.

The research, which polled 70 professional DB trustees appointed on schemes with a total AuM of more than £60bn in July this year, sought to uncover the timings of when trustees plan to step down from their roles. Concerningly, a massive 40% of professional DB pension trustees plan to step down in 7-11 months, while the same number (40%) plan to step down from their role in 1-3 years. The final 10% plan to step down from their role in 4-5 years. This means that the average professional DB pension trustee expects to stand down in about 20 months.

The study also delved into the reasons behind why professional DB pension trustees plan to step down from their role. 28% said regulations are too burdensome; however, this is a significant reduction from the 56% who attributed their exit to this last year. 20% also said that reporting requirements are too onerous to keep up with.

An increased proportion of trustees are retiring (35%) or reaching the end of their tenure (27%), while 28% have struggled with the transition to remote work. This may raise the question for schemes around how to ensure they run an inclusive and accessible trustee board.

Year-on-year comparisons of reasons why trustees are planning to step down:

 20212022
The regulations are too burdensome56%28%
I don’t feel I have the knowledge to perform the role44%22%
The reporting requirements are too onerous41%20%
I have health concerns29%30%
It’s taking up too much of my time24%23%
I’m retiring from all work18%35%
It’s the end of my tenure12%27%
I’ve struggled doing the role remotely6%28%
There are no key motivations in my decision to step down as my position as a trustee in the next 3 years0%0%

Bob Campion, Senior Portfolio Manager, Charles Stanley Fiduciary Management comments: “The volatility of recent weeks has shone a spotlight on how vital expertise and experience are in the management of pension funds. Professional Trustees hold a critical position on the board as trusted and expert voices in deciding the best route for the scheme – from the collection of contributions, to the investment of assets, to the payments of benefits – which has only become more entrenched as the landscape for DB schemes gets more complex.

“However, with a notable rise in the number of DB pension scheme trustees looking to step down from their tenure, pension schemes could swiftly find themselves in a sudden shortfall of professional oversight. It’s vital that the industry puts the work in now to find out what’s driving the move, and also try to attract and retain the required new influx of talent.”

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