Transparency and trust: two of the reasons why many pension plans have appointed professional independent trustees, or are considering doing so. But a Government paper focussing on transparency and trust may cause many plans to have to re-engineer how their trustee board operates.
The problem lies in the Government’s report entitled “Transparency & Trust: Enhancing the Transparency of UK Company Ownership and Increasing Trust in UK Business”, detailing some notable proposals for change in corporate regulation – the so-called “see through proposals”. The thrust of the Government’s position is that enhancing accountability and transparency will build trust that will foster economic growth and the UK’s reputation for providing a sound business environment – all good stuff. The key proposals are the creation of a public register of company beneficial ownership and the outlawing of bearer shares and, in most cases, the use of corporate directors of companies. The creation of a central registry of company beneficial ownership represents a significant change in company law, imposing new duties on both companies and their beneficial owners, backed by new criminal offences.
Roll this out into the pensions context and there are a few points to note:
- First, this will have no effect on traditional unincorporated trustee boards. But the ever-increasing popularity of incorporating trustee boards means that these proposals are likely to be of widespread interest to pension plan trustees, both existing corporate trustees and those considering making the change.
- Second, whilst most corporate trustees are subsidiaries within the sponsoring employer group, where the trustee company is set up as a company limited by guarantee or on some other standalone basis, the beneficial owners will generally be the trustee directors themselves. This will have to be disclosed on the new beneficial ownership register (although private residential addresses can be withheld).
- Finally, and perhaps most significantly for pension plans, whilst the report envisages exceptions to the prohibition on the use of corporate directors of companies (and lists pension plans as an area of potential exception), corporate trustees of pension plans do not make the list of exemptions. Given that a significant chunk of the professional trustee market operates by way of incorporated entities, this may mean that trustee companies with a professional trustee company director will no longer be able to operate on that basis.
There is time for these proposals to change before they are finalised, and the professional trustee community is busy lobbying BIS, but this is yet another thing that pension plans, already struggling with the deluge of legislative and regulatory change, are going to have to keep an eye on.