Pension Trustees

The pension scheme trustee is to apply the scheme assets in accordance with the relevant trust and legislation for the benefit of scheme members and other beneficiaries. In addition to common law duties of care and equitable obligations, there are civil penalties of up to €5,000 for individuals and €50,000 for companies, as well as criminal penalties on conviction for breach of obligations.

Any person can be a trustee, provided they are over 18. Certain persons are disqualified from being trustees under pensions legislation, including persons convicted of offenses of dishonesty and deception; undischarged bankrupt persons who have made an arrangement with creditors; disqualified company directors, and others.

The Regulator may prohibit a person from being a trustee if they are not a fit and proper person to be a trustee. The Regulator may suspend the trustee if they are not a fit and proper person.

A trustee may be an individual or a corporate trustee. The Trust Corporation is a pre-existing entity under the Public Trustee Act 1906, which has certain advantages in terms of giving receipts for the sale of land. It is not the same as a trustee who is a company.

There is no statutory requirement that a trustee be an independent person of the employer; an independent person should be appointed as far as possible to avoid conflicts of interest. Commonly, a professional independent trustee is appointed with skills and experience in the relevant area.

The Regulator may appoint an independent trustee during a PPF assessment or where the employer is subject to insolvency proceedings or in receiver administration. The regulator must appoint from a register of eligible trustees. In this case, only the appointed independent trustee may exercise discretionary powers.

The trustee may be appointed by the Regulator in certain circumstances from its panel. The appointed trustee must be on the register, and certain regulations are applicable to them.

There is a statutory requirement for member-nominated trustees.

Trustees are protected by employment legislation from unfair treatment on the ground of being a trustee or the manner in which they exercise their functions. They are entitled to reasonable time off to perform their functions and for training. There is a special right to apply to an employment tribunal if they suffer any detriment.

The general principle is that trustees are appointed in accordance with the scheme documents. See the general rules in relation to trustee appointment. The employer may have the power to appoint the trustees and must exercise it on a fiduciary basis in the interest of the scheme’s beneficiaries.

Details of changes in trustees must be notified to the Regulator. The Regulator may appoint trustees following the prohibition or disqualification of former trustees. This may occur where the Regulator is satisfied that it is reasonable to make an appointment to secure the trustees as a whole the necessary knowledge and skill for the proper administration of the scheme, secure the proper use and application of assets, and generally protect the interests of members. An application may be made by existing trustees, scheme members, or employers for an appointment by the Regulator.

Trustees owe fiduciary duties in accordance with the general provisions of trustee law and equity. This includes a duty not to profit from their position as a trustee and to avoid conflicts of interest.

They have a duty to act as a prudent person would in the conduct of their affairs. A professional trustee is likely to owe a higher standard. The pensions legislation now requires specific trustee knowledge and understanding in relation to a number of matters.

Trustees are bound by the terms of the trust deed and rules. They must act impartially as between different classes of beneficiaries. They are obliged to seek appropriate professional advice on matters on which they do not have sufficient understanding.

Trustees cannot generally delegate the powers unless specifically authorized to do so. There is a limited statutory power to delegate. However, trustees will generally be authorized, and it will be appropriate to delegate the investment decisions to a professional external person. An investment agreement should be entered into.

Trustees must act prudently in the appointment. Instead of an investment manager, a pension manager. A pension manager need not necessarily be appointed, and trustees may have their own in-house expertise.

Trustees have a statutory and equitable duty to collect contributions and apply them towards the scheme. They must keep records of receipts, payments, and accounts. These obligations are both equitable and are fleshed out by the legislation.

Trustees are obliged to disclose certain information to scheme members and prospective members, spouses, civil partners, recognized trade unions, and beneficiaries. Generally, a scheme booklet and individual benefits statements may be used to satisfy the disclosure obligation.

Trustees must disclose details of benefits payable, details of governing documentation, basic scheme information, reports, accounts, actuarial valuations, and other documents and documents relating to funding.

Most information is only disclosed at request. Others must be provided irrespective of request. Under general principles of law, trustees have obligations to disclose information where they are being challenged in relation to the exercise or non-exercise of their function.

The Pensions Act 2004 creates a statutory requirement for trustees to have knowledge and understanding of certain matters. They must be conversant with key scheme documents and understand the law relating to pensions and trusts and other matters relating to occupational scheme funding and investment. This requires a working knowledge of the documents and relevant laws, principles of funding, investment, and other prescribed matters.

There is an exemption in respect of schemes with fewer than 12 members, schemes where all members are individual trustees, and either trust decisions must be made unanimously.

The regulator may issue an improvement notice if they are of the opinion that pension legislation is being contravened or making it likely that the contravention will be continued or repeated.

The regulator has issued a code of practice in relation to trustee knowledge and understanding requirement.

The code of practice seeks to assist trustees and their knowledge and understanding requirements. How they might approach their obligations, how they might update, and demonstrate requisite knowledge. The guidance deals with a range of issues relevant to pension trustees.

Pension management institution has developed awards and pension trusteeship, which are formally recognized. There are no mandatory quantification requirements. Code of practice requires professional trustees to have appropriate experience and qualification.

Legislation sets out provisions in relation to trustee meetings, supplementing those in documentation. Unless the documentation provides otherwise, decisions are to be made on a majority basis. Trustees may set their own quorum for meetings.

In certain cases, specific decision-making requirements apply under the legislation. Key matters such as the removal of a member-nominated trustee requires the approval of all other trustees, notice of occasions where decisions may be taken by a majority must be given to each trustee to whom it is reasonably practicable to give such notice, unless they otherwise agree. It must state the time, place of the meeting and send at least 10 business days before the meeting to the last known address of the trustee.

There are mandatory requirements for member’s nominated trustees. At least one-third of the members must be member-nominated. There is an equivalent duty on the directors of a corporate trustee to appoint member-nominated directors.

There were limited exceptions where every member is a trustee and no other person is a trustee. There are exemptions for schemes of fewer than two members, schemes with small occupational pension schemes with less than 12 members, all members are trustees and decisions must be unanimous, unregistered schemes, small insurance schemes, stakeholder scheme, certain other schemes.

Arrangements must be put in place for nomination and selection of member nominees. The process must include active members and pensioners or organizations which represent them. Organizations must be trade unions, staff committees, pensioner groups, etc. The process may be by any manner, and the process is flexible. Scheme rules may give effect to the provisions.

Pensions must not exclude member-nominated trustees or directors from any functions exercisable by other trustees.

There is provision for civil penalties for a failure to comply with the obligations.

Trustees of schemes must make and implement schemes for the resolution of disagreements relating to the scheme with persons who have an interest in the scheme or their representative. This is intended to be a flexible, economic means of resolving disputes. The internal dispute procedure may be either single-stage or two-stage. Details of the scheme must be provided and set out in writing. Since 2008, a single-stage scheme may be adopted.

Decisions must be made and notified within a reasonable period. It is to be made within four months of receiving the application.

The decision-maker must inform the complainant of the rights to avail of the pension advisory service to assist in any difficulty with the scheme and provide its contact details. The procedure may not be used where court or pension ombudsman procedures have commenced in respect of the dispute.

Trustees may be exonerated from liability in the trust deed. Exoneration clauses are potentially valid. However, unfair contract terms legislation restricts the extent to which they may exclude liability for negligence on the part of a business context such as a professional trustee.

The pensions legislation prohibits the exclusion or restriction of liability for breach of an obligation under any rule of law to take care or exercise skill in the performance of investment functions. Where, however, investment functions have been delegated, then the trustees are likely to escape liability provided they have appointed parties and have undertaken appropriate supervision.

The Companies Act now allows indemnity of corporate trustees and occupational schemes to be indemnified by the company or an associated company. This does not apply to liability for fines, penalties, and associated costs.

Trustees, in common with employers, advisors, and others involved in the administration of a scheme, have a duty to report breaches of law which are likely to be of material significance to the Regulator. They must take account of the nature of the breach, its cause and effect. It is likely to be material when it relates to dishonesty, inaccurate information for governance and control. It is more likely to be material where it has a substantial effect on assets, monies, and benefits.

In response to a report, the regulator may take a range of measures. This may range from assisting trustees, providing guidance to removing them and freezing the scheme. It may impose special funding requirements or order the funding scheme to be revised.

As set out in separate chapters, certain events are notifiable by trustees and others. These include scheme-related events and employer-related events. It is a breach to fail to notify where the obligation arises. There are trustee and employer events. Thresholds for materiality in certain cases.

Occupational pension schemes must have adequate internal controls under EU IORPS legislation. These are procedures for administrating, monitoring, and managing the scheme.

The regulator has published a code of practice on internal controls.