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.