By Bob Howard
BBC Radio 4's Money Box
Sir Bryan Nicholson is concerned about the risks to pension funds
Many pension fund trustees do not really know what they are doing and need better training, Sir Bryan Nicholson, outgoing chairman of the Financial Reporting Council has said.
His comments come as concern grows over pension fund deficits and the closure of more final salary schemes.
Trustees control the assets of pension schemes - often hundreds of billions of pounds - and if they make a wrong a decision, the consequences could be disastrous.
But speaking to BBC Radio 4's Money Box programme, the Pensions Regulator defended their work, saying they are doing a good job and should be encouraged to continue doing so.
Many trustees are ordinary employees who volunteer to tackle highly complex pensions issues on a part-time basis.
This gives Sir Bryan Nicholson cause for concern.
Speaking to BBC Radio 4's Money Box, he said: " In no sense am I denigrating the work of trustees, but simply pointing out the risks that are inherent in such complicated matters being dealt with by people on a part-time basis.
"I would like to see the bringing in of more external advice, the opening up of the trustee community, perhaps by paid trustees to a wide group of people, and the further strengthening of the training requirements.
"It's about... improving standards, thinking of new ways of making it more likely that pensioners are going to get what they expect to get."
The latest Pensions Act says that by October 2006 all trustees must have an appropriate knowledge and understanding of investment and wider trustee issues.
If they do not, the new Pensions Regulator has the power to fine and even remove trustees from boards.
At the moment, a third of each scheme's trustees have to be nominated by employees in the scheme, but the government is planning to raise this to 50% by 2009.
That means even more part-time trustees will have to make critical decisions.
Christine Farnish, Chief Executive of the National Association of Pension Funds, also has concerns with these arrangements.
Speaking to the programme she said: "The world's got a lot more complicated since the trustee system was first set up, and these people now have some really complex issues to get their heads around."
Large company pension schemes have the resources to train trustees but it is much more difficult for smaller ones.
The Pensions Regulator estimates that around 80% of schemes have fewer than 12 members.
As President of the Pensions Management Institute, Penny Green has been working to improve all aspects of running pension schemes, including raising trustee standards.
Ms Green told the programme it is wrong to suggest all trustees lack sufficient knowledge to perform their roles: "When you look at the medium-sized and the larger schemes then I don't think it's true.
"I think we have knowledgeable trustees across both investment and the other aspects of trusteeship."
One way to improve confidence could be to move towards more paid and professional trustees.
But Charlie Massey, Strategic Development Director at the Pensions Regulator, told the programme it is not something they are considering yet: "We don't want to go in and say let's professionalise trustees right now because I don't think the evidence base supports that.
"A lot of trustees are going a very good job and we want to encourage them to continue to do so."
The Pensions Regulator has been taking action to improve standards. Next month it is launching its new E-learning programme specifically aimed at improving trustees' knowledge.
BBC Radio 4's Money Box was broadcast on Saturday, 7 January, 2006, at 1204 GMT.
The programme was repeated on Sunday, 8 January, 2006, at 2102 GMT.