January 2012

Photo of David Francis

1 February 2012 is the cut off time by which trustees, who were trustees prior to and after 1 February 2010, must have completed their trustee training. Trustees appointed since 1 February 2010 had to receive training within six months of their appointment. 

Every trustee of an occupational pension scheme (except a death benefit only scheme) must undertake trustee training in accordance with the Pensions Act. If you are an employer who operates a scheme you must arrange for the trustees of that scheme (other than a professional trustee or a pensioneer trustee) to receive appropriate training. A failure to do so could result in fines and even imprisonment. 

In light of the above, it would be prudent for both employers and trustees to ensure that they have met their obligations and, in particular, that trustees, who were trustees on 1 February 2010, have undertaken relevant training prior to the 1 February 2012 deadline.  An alternative course of action could be to replace the current trustees with a professional trustee (who the employer is not required to arrange training for) before 1 February 2012.

Photo of David Francis

As the management and governance of pension schemes continues to increase in complexity and risk both sponsoring employers and trustees of pension schemes are increasingly looking towards appointing professional advisers to bring knowledge, experience, and expertise to the governance and management of their pension schemes in an effort to reduce risk and achieve cost efficiencies.

It is important for trustees and the sponsoring employer (who ultimately may be footing the bill) to understand the nature of the relationship between them and the advisers they decide to appoint and to be prepared to question them (and the agreements governing the relationship) critically.  

Pension Scheme Administrators

Many sponsoring employers and trustees appoint pension administrators and consultants to assist in relation to their pension schemes.  The written agreements documenting such appointments should be reviewed.

Leaving aside the actual services to be provided by the administrator or consultant and the fees for doing so (which the trustees and sponsoring employer will need to be satisfied with) the key issues you must consider are:

  1. Who should be party to the agreement?
  2. What should the obligations and duties on the parties be?
  3. Who should be liable for what and what is a reasonable limit?
  4. How will conflicts, complaints and data protection be dealt with?
  5. Who controls the amendment of the agreement?
  6. Can the service provider get someone else to provide the service?
  7. How will the relationship be terminated?

Professional Trustees

Many sponsoring employers appoint professional or independent trustees.  This is often under a service agreement or letter of engagement. Many of the issues outlined above in relation to administration agreements will also arise in this context. It is imperative that you understand the effect of the key provisions of such documents and the relevant provisions of the pension scheme. Particular consideration needs to be given to the charging clause and indemnity and exoneration provisions under the scheme’s governing trust documentation and how these interact with the service agreement appointing the professional trustee. If such written agreements are not already in place this should be rectified.

Photo of David Main

As more and more sponsors of defined benefit schemes are preparing to terminate contributions to their schemes or are going into receivership, examinership or liquidation, a question which keeps arising for trustees is whether or not they are under a duty to demand payment of the scheme’s deficit.

When trustees either know or have a justifiable belief that the sponsor of their defined benefit scheme is about to terminate its contribution liability or suffer an event of insolvency, our view is that the trustees need to take immediate action. The first thing they need to do is to look at the scheme’s employer contribution rule and the winding-up provisions and see what powers they have.  Only then can they decide what to do. 

Continue Reading Trustee contribution demands: is there a duty to make them?