The Pensions Regulator

Code of practice 07
Trustee knowledge and understanding (TKU)

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The level of knowledge and understanding

30. Just as there will be different requirements in relation to the scope of the requirements, according to the role and current expertise of any individual trustee and the type of scheme in question, so the level of knowledge and understanding will also vary according to the role of trustee and the nature and complexity of the scheme.
31. Trustees may well find that the units of the Scope Guidance which cover asset allocation and investment matters are the ones where they need to take particular care in assessing their own learning requirements. These are likely to vary considerably according to the circumstances of their schemes and their own roles on the trustee body. Among other, scheme specific considerations, they should be guided by:
    • the level of the decision making undertaken by individual trustees;
    • the nature and complexity of the scheme and the extent to which there is discretion to make investment decisions (e.g. very little discretion in a with profits fund);
    • the size of the fund and the extent to which there are opportunities to consider particularly volatile investments with a small proportion of it; and
    • the maturity of the scheme (DB only) and the extent to which this might dictate the asset classes which are available to trustees.
32. All trustees will need a good understanding of such matters as:
    • their duties, responsibilities and powers;
    • when they might be in a position of conflict of interest; and
    • the risk/reward concerns governing the choice of asset classes.
33. On the other hand, it is likely that they will only need to know, rather than understand, such matters as:
    • the requirements for the appointment of member nominated trustees;
    • eligibility for membership of the scheme; and
    • the implications of contracting out.
34. Particular responsibilities fall on the chair of the board of trustees and the chair of the investment sub committee if there is one. Members of those bodies will look to the chair for guidance and it must equip itself to be able to accept the particular responsibilities of its role. This may mean learning at a deeper level than that required at the basic level for the vast majority of trustees, particularly for chairs of large and complex schemes and chairs of investment sub committees.
35. As indicated, there are a number of ways in which trustees may set about acquiring the appropriate knowledge, including traditional classroom learning, distance learning and e-learning. They will need to consider the cost, as well as the convenience and the time to be allocated. They should also ensure that learning programmes take account of the particular learning needs of each participating trustee, that they allow for plenty of participation and activity and that they allow all participants to make frequent reference to their own scheme and its documents.
36. An e-learning programme might be particularly suitable for overseas trustees.

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