Heywood
As the pension risk transfer (PRT) market continues to grow, the spotlight is on professional trustees to demonstrate robust decision-making and strong governance.
As the Pensions Regulator (TPR) proposes to extend its oversight to include professional trustee firms, expectations are that TPR will initially focus on governance and decision making. It will expect evidence and transparency to be behind major, strategic decisions that affect the scheme. A PRT deal would be one such decision. Whether it’s closing to future accrual or entering a longevity swap, process, evidence and transparency for decision making should be front of mind for trustees.
Trustee governance in pension risk transfer
Beyond making good decisions (in the interest of scheme members) TPR will expect trustees to demonstrate that PRT decisions are built on reliable, objective and up-to-date information.
Mitigating and hedging risks that threaten the security of members’ benefits are in keeping with a trustees’ fiduciary duties. It is also in keeping with these duties that trustees ensure that each PRT transaction mitigate the risks and secure the benefits they were intended for. A big part to doing that is to show clear, documented evidence of data quality, validated benefit calculations (high level or detailed benefit audit), scheme benefit summary and transparent member communication. Demonstrating each of these areas with clarity and confidence is becoming a clear expectation for trustees when scrutiny is increasing and accountability is front and centre.
Greater examination from the regulator may prompt schemes to reflect more critically on where their advice is coming from and whether there is sufficient separation between those delivering recommendations and those validating them.
Trustees don’t need to have all the answers themselves, though they do need to be confident in the integrity of the information they’re relying on.
Key questions professional trustees should keep front of mind
Every scheme is different, but there are common governance questions that should be considered by trustees:
- Do we have a clear view of our scheme data and how well it meets our strategic/risk transfer objectives?
- Are our benefit calculations accurate and have they been assessed and verified?
- Can we show how our strategy reflects the scheme’s current position, governance structure, member interests and market conditions?
- Are our communications with members timely, transparent, understood and supportive of a cost effective PRT transaction?
With tighter deadlines and resource limitations, many trustees face increasing pressure to maintain high standards. So, how can technology help ease these pressures while supporting strong governance?
Whether that’s through automating data preparation, streamlining benefit validation or simplifying communications, tech-led solutions are enabling trustees to manage the demands of the risk transfer process and better evidence their decision-making process more efficiently. This will support better outcomes, even when resources are stretched.
How technology is helping trustees strengthen governance
Technology is playing an increasingly important role in helping trustees demonstrate best practice throughout the pension risk transfer process. From validating scheme data to auditing benefit calculations with greater speed, accuracy and evidence, tech-led solutions are helping trustees demonstrate good governance more efficiently and with greater confidence. With clearer insights, faster preparation and improved transparency, trustees are better equipped to move at pace and meet the expectations of advisers, insurers and regulators alike.
We’ve also recently discussed AI and it’s role in driving forward solutions that enable PRT transactions to move forward faster and more efficiently.
Strengthening your scheme’s position
As PRT transaction volumes continue to rise – 2025 is on course to be another record breaking year - trustees have a critical role to play in ensuring schemes are well prepared for engagement with insurers, as well as for greater regulatory focus.
Being able to clearly demonstrate good governance around how decisions are made, supported and delivered is another string to the bows of leading trustees.
