Irish Pensions Magazine Spring 2015
8
Feature
Advertorial
T
rustees of occupational pension schemes have an
increasingly difficult job to do with the expansion
of the regulatory and legislative. This is also borne
out by the growth in claims that demonstrates that
errors can occur even in the best managed schemes,
particularly in the increasingly dominant environment
of defined contribution schemes.
However, many trustees do not consider pension
trustee liability insuranceuntil a scheme is being closed
and it is apparent that the sponsoring employer might
no longer be in existence in the future. This can leave
the trustees vulnerable to claims and it is sensible to
obtain insurance cover early when the scheme is on-
going which then provides full protection and also
makes it easier to have continuity of cover with run-
off insurance when the scheme is wound up.
Liability for breach of trust is a personal liability and a
trustee is liable to both the scheme beneficiaries and
to scheme creditors. The risk is potentially greater after
a winding up when there may be missing beneficiaries
or other contingent liabilities but no assets. A trustee
or trustee director is also potentially at risk of having
to pay a civil fine for breach of pensions’ legislation.
In addition, a trustee’s personal exposure does not
cease when they retire and their post retirement
situation may make them particularly vulnerable.
Problems in pensions also often take a considerable
time after the event to materialise. It is important,
therefore, that the position of retired trustees and
pension managers is properly protected and lifetime
insurance cover is available to provide this protection.
Many trusteeswill have the benefit of clauseswithin the
trust deed and rules exonerating them from liability,
and in many instances, an indemnity may be given
by the scheme or the sponsoring employer company.
However, it is not always appreciated that such clauses
are subject to statutory limits and other restrictions.
It should also be realised that an indemnity from the
employer would be of no value upon the company
becoming insolvent when the trustees are still having
to manage the scheme. An insurance policy can stand
in front of such indemnity and exoneration clauses
and will overcome these limitations.
With the continued growth in defined contribution
(DC) schemes, it is important to recognise that the
trustees of such schemes face different legal risks and
exposures from those of defined benefit schemes. DC
trustees have ultimate responsibility for the accuracy
of statements, market valuations and increasingly
important, the selection andmonitoring of investment
vehicles offered. These factors increase the risk for
claims occurring which has been borne out by claims
experience.
Protecting Trustees, the Scheme, Members & the
Sponsoring Employer
by Jonathan Bull
