Spotlight on effective management of an employed pension trustee

A recent Employment Tribunal decision has brought sharply into focus the question of whether employed trustees are adequately protected when agreeing to take on the demands of a pension trustee.

The case was brought under the seldom litigated section 46 of the Employment Rights Act 1996 (ERA) which provides that an employee has the right not to be subjected to any detriment by his employer on the ground that he performed or proposed to perform any function as a trustee of a relevant occupational pension scheme. Section 102 ERA provides the same protection for trustees from unfair dismissal.

The employee in the case claimed that in failing to reduce her workload and performance targets and displaying underlying disapproval of her taking up the trustee role, she had been subjected to detriment by her managers. The tribunal disagreed and held that she had no statutory or contractual right to a reduced workload to reflect the extent of her trustee duties. The case raises some timely questions as to whether the law provides sufficient protection for employed trustees against a backdrop of increasing regulatory expectations and demands.

What does the law currently say?

Section 58 of the ERA provides that an employer shall permit an employee who is a trustee to take reasonable paid time off during their working hours for the purpose of performing their trustee duties or undergoing relevant trustee training. In determining what is reasonable, regard should be had to how much time off is required and the circumstances of the employer's business and the effect of the employee's absence on the running of that business. However, the ERA makes no express provision for a reduction in duties or tasks performed for the employer where an employee takes time off for trustee duties or training.

TPR Guidance on the subject is also sparse. In the section for employers on working with trustees, it simply states:  “You should make sure that your trustees have the time and resources they need to run the scheme well. They should have a budget to get good advice, and the right training and skills”.

In 2010, to inform its decision as to whether it should use the power under section 243 of the Pensions Act 2004 to increase the proportion of member nominated trustees from one third to one half, the DWP published this study which looked at some of the difficulties trustee boards face in recruiting and retaining member nominated trustees. Page 22 of the study reports that “The MNT role was seen as requiring significant time investment to manage the extra workload. Employees were often said to be reluctant to take on this extra burden if they foresaw a negative impact on their performance in their day-to-day responsibilities”.

But with TPR’s campaign to raise the standards of trustee governance resulting in increased demands and expectations associated with the role, is legislative and/or regulatory change required to better protect those who put themselves forward? Failing to do so may have an adverse impact on the success of another TPR campaign, that of developing diverse and inclusive governing bodies. If we are to encourage those from all backgrounds, education, skills and experiences to be part of a trustee board, sponsoring employers and the industry need to support those trustees who do not have control over their time, targets or workload.

How can employers manage expectations relating to the trustee role?

Absent legislation and regulatory guidance, we are seeing an increasing number of queries from employers and trustees in this area. There are examples of good employer practice. The 2010 DWP study reported that “levels of concern about time pressure varied between organisations depending on the levels of support and cover offered. While some employers expected MNTs to manage their own time effectively, others made allowances and gave trustees time off before board meetings to read appropriate documents and prepare for discussions”.

Here are our top tips for employers of pension trustees:

• Speak to the Chair of Trustees to understand the amount of time that will be required to prepare for and attend trustee meetings. Trustees may be required to attend sub-committee meetings in addition to main board meetings.
• Ensure you understand the training requirements of the trustee role. Newly-appointed individual trustees have a period of six months from the date of appointment as trustee to complete the required learning, which TPR generally expects will be met by completion of its Trustee Toolkit. For DB trustees, the estimated time to complete the Toolkit is 13.5 hours, for DC trustees, it is 10 hours and for trustees of hybrid schemes it is 16.5 hours. Whilst the Toolkit should ensure most trustees meet their statutory knowledge and understanding obligations, those from large or complex schemes may require further training. Ongoing and “just in time” training, focussing on specialist topics as they come up, is also required.
• In addition to training, newly-appointed trustees have a period of six months from their date of appointment to become conversant with the scheme’s documents. This is not just the scheme’s trust deed and rules but the Statement of Investment Principles and the Statement of Funding Principles, and, in the case of a corporate trustee, the Memorandum and Articles of Association. Trustees must also be familiar with other documents relating to scheme governance, policies and procedures and general administration including the trustees’ policy on management of conflicts of interest. Once the Single Code of Practice and Effective System of Governance comes into force later this year, trustees will need to familiarise themselves with a number of new policies and procedures.
• Communicate the expectations and obligations of the trustee role to both the employee and the trustee’s line manager on appointment. Reach agreement on matters such as:
  • How and when managers and colleagues should be notified of dates and times of any absences to attend trustee meetings or training;
  • Whether and how much paid time off will be provided to prepare for a trustee meeting or sub-committee meeting and to undertake training;
  • Whether and how much of their own time the employee will be required to spend preparing for trustee meetings or sub-committee meetings and to undertake training;
  • Whether and how the employee’s work will be covered during any time off;
  • Whether and how any adjustments will be made to the employee’s workload or targets as a result of undertaking the trustee role.
• How and with whom any concerns or queries about performance of the trustee role should be raised to ensure that matters do not escalate into an employment tribunal claim.

“Most people do the extra bit at home and things and in actual fact, still work to full capacity [...] in my experience, they’ve [MNTs] always worked a lot harder. (Employer, 200-999 employees, DB scheme)”.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/214441/rrep670.pdf