The TUC has called for a stronger worker voice on the boards of pension megafunds, as the government looks to scale up schemes and improve governance standards.

In a new report launched at the TUC’s Pension Conference today, the union body looks at the vital role member representation plays in pension funds around the world. Pensions Minister Torsten Bell MP is also due to address the conference.

The report finds member-nominated trustees (MNTs) strengthen accountability, decision quality, engagement and diversity on scheme boards, and reassure workers that their pensions are being looked after.

In the UK, mandatory MNTs were introduced after the scandal in which Robert Maxwell stole £450m from pension funds of companies he controlled to prop up his failing business empire in 1991.

But changes to the system in recent decades mean that most workers are now in multi-employer schemes that are exempt from these requirements. Plans to consolidate the sector into fewer, bigger funds will accelerate this trend.

Government consultation

As government consults on improving pension scheme governance, the TUC is urging ministers to take this opportunity to ensure that members have a voice on trustee boards, regardless of the type of pension scheme their employer chooses for them.

Making member representation work on the biggest pensions schemes does bring challenges, particularly when they are no longer directly linked to individual companies or industries. But there are solutions.

The TUC says the UK should look to countries such as Australia and Canada for lessons in overcoming these challenges.

In these countries even the largest multi-employer schemes, with millions of members and hundreds of billions of dollars of assets, have a clearly defined role for member representatives.

This success internationally is driven through clear routes into trusteeship and support for member trustees, and governance structures that enable diverse groups of workers to feed into decision making.

The report lays out how, in these conditions, member representatives hold pension professionals to account, reduce groupthink, strengthen communications and engagement, and keep focus on member priorities such as sustainability and fees.

Recommendations

The report makes three key recommendations:
Establish minimum requirements for member representation at scale by requiring all trustee boards of trust-based pension schemes to include at least one-third member representation, regardless of scheme size or structure.

Encourage governance structures that recognise the diversity of members in multi-employer schemes and are rooted in clearly defined constituencies of workers based on characteristics such as the industry they work in.

Set minimum standards for support, training and resourcing to ensure that representation is effective rather than symbolic.

Pension schemes deliver better outcomes for members - and ultimately a better quality of life in retirement - when those members have a say in how they are run.

As the government looks to move to a system of fewer, bigger pension schemes, ministers should look to Australia and Canada to see how member representation can help to ensure those bigger schemes deliver better results.

All workers deserve to retire in dignity. It is vital that pensions are governed fairly.