Helping trustees to reduce key person risks

The pandemic brought business continuity plans into operation across advisers and trustees. Trustees were required to address the immediate issues raised by Covid-19, such as restrictions on face-to-face meetings, but there are still lessons to be learned for the future.

While the short-term response may have been addressed, trustees must continue to think about long-term issues to make sure their business continuity and risk management plans are fit for purpose. It looks likely that the impact of Covid-19 and the related changes to working practices, such as flexible and distance working patterns, as well as dynamic recruitment and retention changes, are here to stay.

The risk

One ever-present risk, which Covid-19 brought more into focus, is where there is an individual appointed to fill a particular role. What happens if they are not there due to pressing family commitments, being furloughed or ill-health?  

Many schemes use an individual as pensions manager and/or scheme secretary. Nobody is indispensable but there may be no obvious substitute for such a key individual. If the key person is unavailable to meet their responsibilities, this could lead to delays and extra cost at a time when it is least needed.   

Our approach 

We have worked for many years with in-house teams to provide business continuity in various areas of pension management services. We assist different sizes of schemes to a varying extent – we have even taken over a whole secretariat function. In some cases, we have stepped in at short notice because of an unplanned absence. In other cases, we act as a planned business continuity activity on either a temporary or a permanent basis.

When appointed, we take time to get to know the key individuals, responsibilities, the way their organisation works and the way their scheme operates. We use this information to ensure that the service we provide is tailored to the in-house operations in place. For example, for clients where the payroll is provided in-house, we have put in place a contingency plan to take over the payroll in an emergency situation. 

Our approach in practice

We were appointed to cover an in-house pensions manager’s absence for an extended period. The pensions manager was secretary to the trustee board and oversaw an in-house administration team. This meant that continuity of service was vital, from running trustee meetings to preparing accounts.   

We provided a senior pensions management consultant with the knowledge and experience to step into the shoes of the pensions manager. Our client was pleased with the service we provided and we built up a significant amount of knowledge relating to the scheme and its operations. They could see that extending the relationship would lead to a significant reduction in some of the risks affecting the scheme. As a result, we are now part of the client’s business continuity plan.  

After the pensions manager returned there was no need for us to be a permanent presence – instead we attend one trustee meeting each year, acting as secretary for that meeting and taking minutes in place of the pensions manager. That way we remain familiar with the in-house team and processes, the trustee board and other advisers. We do this in a way that provides a benefit to the client – we provide secretarial services rather than simply sit and listen.

The client has successfully managed some of the risks affecting their scheme by extending our appointment in this way. They have peace of mind that the pensions manager function could continue seamlessly if for any reason the pensions manager were unable to fulfil their role or needed further support, whether for short, planned absences such as holidays or longer unexpected periods of absence.