Posts Tagged ‘Professional Trustees’

Andrew Kerrin

Well, the wait is finally over. Horton v Henry has been decided. After hearing arguments in April and deliberating over this important decision for 6 months, the Court of Appeal released their much anticipated judgment on 7th October 2016. Unfortunately for me, this came a week after my summary of the case history was published in PMI News with a “wait and see” conclusion on the Horton decision. The Lord Justices clearly forgot to give me a heads-up… so rude!

Anyway, as mentioned in my article and earlier blog this decision has been a long time coming. A controversial and potentially devastating judgment for bankrupts (Raithatha in 2012) has been put to bed, meaning bankrupts can now breathe a sigh of relief that their entire pension pots post Pension Freedoms are not at risk of an Income Payment Order.  Read more »

Ian Craig

It should come as little surprise that, given 2016 has been one of the most volatile in recent years, the amount of completed buyouts in the first half of 2016 is almost half that of 2015’s corresponding period.

The perceived fall in demand is, however, based on somewhat skewed figures as many insurers brought forward transactions to the tail end of 2015 ahead of the Solvency II requirements kicking in from January.  Solvency II is, of course, EU legislation aimed at harmonising the insurance regimes of its member states.  The trigger of Article 50 will be the trigger for those blogs… Read more »

Gillian Lister

21st Century Trustees

The Pensions Regulator’s 21st Century Trustee initiative inspired a previous blog by one of my Dalriada colleagues recently “Trustees in the 21st Century” and is now the subject of a discussion paper.  What should a modern trustee look like and is regulation required?

Let’s face it, being a pension scheme trustee was never an easy job but it just seems that it is becoming more and more demanding.  The demands being met by trustees require them to have a complex knowledge in the minefield that is now pensions and they are coming under increased scrutiny. This means that effective trustees need a high degree of knowledge and understanding. Trustees need to be knowledgeable of the whole pensions landscape, understanding such things as scheme funding, investment decisions, employer covenant and above all else the best interests of their membership in relation to that pension scheme. The wisdom of Solomon and patience of Job would seem apt for a trustee job description. Read more »

Andrew Kerrin

(The ‘H’ on my keyboard is in for a tough afternoon!)

Good news for bankrupts. Bad news for creditors.  Important news for trustees in bankruptcy and pension scheme trustees alike.  The High Court, in the case of Hinton v Wotherspoon, has delivered a judgement that provides real clarity on how the pension income of a bankrupt can be subjected to an Income Payments Order (“IPO”).

Now, it has to be said at the outset, that a case on the same issue (Horton v Henry) – that Hinton proclaimed as “plainly correct” – was heard by the Court of Appeal in April. That decision will be crucial, as it will represent a binding decision from a higher court, unlike Hinton and Horton that are both first instance decisions in the High Court. Read more »

Rachel Graham

The Pensions Regulator (TPR) have recently issued guidance for defined benefit (DB) schemes on how to assess and monitor the employer covenant (“the guidance”). This guidance aims to provide trustees and employers of DB occupational pension schemes with detailed good practice guidance to assist with their duties in the process of employer covenant assessment. This guidance will be welcomed by DB scheme trustees as to quote my colleague Richard Smith’s June 2015 blog “What drives your Employer Covenant?“, “…assessing the strength of a company and then monitoring the way that changes is no easy task”.

In July 2014 the TPR issued its revised Code of Practice 3: Funding Defined Benefits (“COP”) which identified three key areas of risk DB schemes face and how these risks interrelate;

1. Employer Covenant Risk

2. Investment Risk

3. Funding Risk.

Read more »


Fraser Sparks has kindly agreed to contribute the following blog for the Spence & Partners’ website. He is a partner at Stephenson Harwood with over ten years’ experience of advising employers and trustees on all aspects of pensions law.

For one reason or another it seems likely that within a very short space of time we will reach a point when virtually all defined benefit occupational pension schemes will have at least one professional trustee on their board.  This blog is not intended to be an advertisement for professional trustees; rather it looks at some of the reasons why business is booming in this sector.

One must start by looking at the context within which DB schemes now operate.  Most are closed to new entrants – so are no longer relevant to the employer’s recruitment policy; and an ever increasing number are ending future accrual of benefits – and so are no longer relevant to the employer’s retention policy.  We have therefore seen a shift in the way pension schemes are managed by employers – this is no longer a human resources issue, it is simply a finance/ treasury issue. Read more »

Neil Copeland

Trustees may soon get the chance to experience an aspect of the celebrity lifestyle enjoyed by the likes of  Robert Downey Jr, Paris Hilton and Kiefer Sutherland – by ending up in jail.

The Pensions Act 2004 did an excellent job of absolving pension scheme advisers of responsibility for most aspects of managing and operating a Final Salary pension scheme and placed that responsibility fairly and squarely on the shoulders, or any other exposed part, of the trustees.

Deciding what assumptions should be used to value your technical provisions? Why would you possibly make that the reponsibility of a highly qualified actuary who spends much of his working life focussed on precisely that issue when you can make it the reponsibility of the trustee instead?

Need transfer advice regulated? Why would you possibly make that the responsibility of the Financial Services Authority, when you can make it the responsibility of the trustee instead?

The old joke, which like many jokes was perceived to conceal a kernel of truth, was that as a trustee, you could be incompetent, as long as you were honest.

How times have  changed! The list of legislative breaches for which trustees can be, at worst, fined or, at best, chastised for is lengthy, and, as the FT reports, lengthening.

The latest wizard idea out of Europe is to produce regulations which mean trustees could face unlimited fines or up to two years in prison for accidental breaches of rules aimed at preventing investment in the sponsoring employer. Now in reality the circumstances where this could come about are unlikely. But not impossible.

Thankfully the  Department for Work and Pensions said that it has been made clear that the Pensions Regulator will not pursue trustees for what are clearly inadvertent breaches. So that’s all right then. Though presumably its the Pensions Regulator who gets to decide whether the breach was inadvertent or not.

When you recall that legislation aimed at preventing terrorist atrocities on the streets of the UK has been used to  try to catch people leaving unwanted items outside charity shops, it does not inspire confidence that laws will not be misued.

As we have blogged previously it is difficult to understand why any lay person would put themselves forward to perform what is, increasingly, a thankless task which leaves people open to criticism from members, employers and regulators. Equally it is increasingly difficult to see that the Regulators expectations of trustees can be reasonably met by individuals who are trying to hold down their day job as well. I feel increasingly sorry for the many honest and dilligent trustees that I work with in terms of the breadth of knowledge and understanding they need to maintain to perform a role which they took on from the best of motives.

Clearly “professional trusteeship” is an idea whose time has come. However, as we have noted previously, there is currently no barrier to any Tom, Dick or Harry setting themselves up as a “Professional” trustee and holding themselves out as offering that service. Whilst final salary pension schemes have been regulated almost out of existsence, professional trusteeship is that rare thing in the modern world, a vitally important profession which would benefit from some more regulation of its practitioners.

David Davison

Brian Spence, Independent Trustee for Dalriada Trustees, talks to PMI TV about GMP equalisation.

As the PPF and FAS bring this issue to the fore Brian explains what it really means and why he thinks, unlike many in the industry, it is not as complicated as some believe. The complexity often lies in the reluctance until now to begin the process and the need to rectify historical pension scheme data.

Brian’s message is for trustees to take appropriate advice from actuaries and lawyers, discover the issues and take the first steps to making all things equal. Brian warns however, the often unpredictable state of historical pension data might hinder the process presenting a perfect opportunity for a cleanup operation to run alongside.

Neil Copeland

Spotted an interesting article on headed “The paradox of professional trustees”.

At simplest a paradox is a statement that contradicts itself for example ”I always lie” is a paradox because, if it is true, it must be false.

My personal favourite is the Kleene–Rosser paradox which was developed by Stephen Kleene and JB Rosser, to show that the lambda calculus was inconsistent. I am not entirely sure what this means but suspect that;

1) I’ve been spending too much time in the company of actuaries and

2) that money directed to pure mathematical research is probably not particularly well spent.

The headline of the article appears to suggest, oxymoronically, or possibly just moronically, that trustees can’t be professional or that a professional can’t be a trustee. The article makes the point that there is nothing to prevent any idiot holding himself out as willing to act as a pension scheme trustee and seeking to charge for performing such a role. It highlights a trend for the great and the good of the pensions world to view acting as a trustee as a nice little earner to supplement their pensions. A sleepy wind down on route to the old folks home with a few long lunches and a decent claret or two along the way.

Anyone approaching trusteeship from this perspective will find themselves as irrelevant to the reality of the role they will need to fulfil as the Kleene-Rosser paradox is to the daily lives of you and me, and possibly just about everyone else on the planet, apart from Messrs Kleene and Rosser.

The article needs to be aware that not all professional trustees fit this stereotype – age and grey hair alone are no longer all that’s required .

Anyone acting as a trustee, professionally or otherwise, is faced with a challenging and dynamic pensions environment which is no place for those wishing to rest on their laurels. Try reviewing the guidance provided for trustees on the Pensions Regulator’s website for an idea of the breadth of knowledge required to adequately fulfil the role. Increasingly the trustee role is seen as something that poses risks for even the most diligent and enthusiastic amateur.  Equally trustee boards are increasingly faced with contentious issues particularly around funding which throw up myriad conflicts of interest for those involved. The professional trustee is clearly a concept whose time has come.

The real problem, which in fairness the article does identify, is the lack of control over those who set themselves up to be a professional trustee.

  • Just because someone is an excellent pensions lawyer does not mean that they are equipped to be a pension trustee.
  • Just because someone is an excellent pensions actuary does not mean that they are equipped to be a pension trustee.
  • Just because someone is an excellent pensions consultant does not mean that they are equipped to be a pension trustee.

A broad skills base is essential and we need to start to see acting as a trustee as a profession in its own right, not a place where old professionals from other disciplines go to die.

One positive recent development is the Pension Regulator’s consultation on its trustee register which has recently closed. The Regulator will obviously be keen to ensure that it suffers no further embarrassment such as that generated by the GP Noble debacle and companies thinking of appointing an independent trustee should be able to take some comfort in the revised register once it is available, as imposing some level of quality control in an area that has been sadly lacking in such to date.

So provided you do your research, and avoid the bull elephants thrashing impotently as the graveyard beckons, then there is nothing paradoxical about “professional trustees” nor, indeed, “intelligent journalism”.

Brian Spence

It has seemed obvious to us for many years that trustees and actuaries would eventually be required to end inequality within occupational pension schemes resulting from guaranteed minimum pensions (GMPs) accrued since 17 May 1990.

The Government’s statement by Angela Eagle on Thursday 28th January is an extremely welcome and sensible step. There is undoubtedly some detail to work through for individual schemes but at least now hopefully the industry can get on with it.

Spence & Partners have extensive experience as actuaries and as independent trustees of implementing practical methods of equalising GMPs.

Stand back though for the roars of anguish from the industry!

Brian Spence is a founder of actuaries Spence & Partners Limited and a director of independent trustee Dalriada Trustees Limited.  You can follow him at @briandspence or @PensionsEndgame on Twitter or link to him on LinkedIn.  Dalriada provides professional trustee services and Spence & Partners can provide support to employers in appointing an independent trustee.  Brian has written a series of articles on appointing an independent trustee.

Follow @SpencePartners and @DalriadaTrustee on Twitter.

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