Pensions
Occupational
Pension Schemes: Trustees’ Responsibilities
Many
employers offer their staff an opportunity to save for their
retirement through an occupational (or company) pension scheme.
Those employees who join the scheme need to have confidence
that the scheme is being well run.
The role of pension scheme trustees is very important in ensuring
that the scheme is run honestly and efficiently and in the
best interests of the members.
We outline in this factsheet the main responsibilities of
occupational pension scheme trustees.
Background
The
Pensions Act 1995 (the Act) brought about a number of major
changes to the way occupational pension schemes are run. The
Act also set up the Occupational Pensions Regulatory Authority
(Opra) as the regulator of pension arrangements offered by
employers in the UK.
Opra has an important and varied role in the pension sector,
which includes:
- looking
into reports that pension schemes have broken the law
- educating
and informing those who work with pension schemes.
In
fulfilling their role, Opra produces important guidance for
those involved with pension schemes including trustees as
well as auditors and actuaries. This guidance is available
from Opra's website (www.opra.gov.uk)
or by telephone or written request.
The Pension Regulator is set to take over from Opra as regulator
in April 2005.
Pension
Scheme Classification
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Employers
can help promote retirement benefits for their employees
in a number of ways including:
- occupational
schemes
- group
personal pension schemes
- stakeholder
schemes.
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An
occupational pension is an arrangement an employer uses to
provide benefits for their employees when they leave or retire.
There are two main types of occupational pension scheme in
the UK:
- salary-related
schemes
- money
purchase schemes.
Whatever
the type of scheme, it will usually have trustees.
The
Role of Trustees
Most
company pension schemes in the UK are set up as trusts. There
are two main reasons for this:
- it
is necessary in order to gain most of the tax advantages
- it
makes sure that the assets of the pension scheme are kept
separate from those of the employer.
In
fulfilling their role, trustees must be aware of their legal
duties and responsibilities. Trustees may have to undertake
appropriate training in order to fulfil their role.
Trustees should also keep themselves up to date with changes
in legislation that affect pension schemes and about pension
issues generally.
Trustees'
Duties and Responsibilities
Trustees
have a number of very important duties and responsibilities,
which include:
- acting
in line with the trust deed, scheme rules and the legal
framework surrounding pensions
- acting
prudently, conscientiously and honestly and in the best
interests of scheme beneficiaries.
In
addition to these general duties, trustees also have a number
of specific duties and tasks that they must carry out. The
main tasks are to ensure the following happen.
Contributions
- The
employer accurately pays over contributions on time. There
are strict rules covering this area.
Financial
records and requirements
- The
right benefits are paid out on time.
- An
annual report is prepared (see annual report below).
- An
auditor’s statement is obtained confirming details
of the payment of contributions to the scheme and, if required,
an audit of the scheme accounts is arranged.
Investment
- The
pension fund is properly invested in line with the scheme’s
investment principles and relevant law.
Professional
advisers
- Suitable
professional advisers are appointed as running a pension
scheme is complicated and often specialist advice will be
needed.
Pension
scheme records
- Full
and accurate accounting records are kept, which include
records of past and present members, transactions into,
and out of, the scheme and written records of trustees’
meetings.
Members
- Members
and others are provided with information about the scheme
and their personal benefits.
Registration
and collecting the levy
- Opra
is provided with information required by law about the scheme
and the annual levy for the scheme is paid.
Related
Matters
Reporting
to Opra
There are circumstances where trustees must report matters
to Opra, for example, persistent failure by the employer to
pay contributions in accordance with the current schedule
of contributions, where the contributions remain unpaid.
There are also circumstances where the scheme’s professional
advisers are required by law to consider reporting trustees,
employers or other professional advisers to Opra.
The annual report
The trustees of most schemes must make an annual report available
within seven months of the scheme year end. The report usually
includes:
- a
trustees report, containing legal and administrative information
about the scheme
- an
investment report
- the
audited accounts and audit report.
Trustees’
Liability
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If
something does go wrong with the pension scheme, trustees
may be held personally liable for any loss caused as
a result of a breach of trust. This could happen when,
for example:
- a
trustee carried out an act which is not authorised
under the trust deed and scheme rules
- a
trustee fails to do something that should have been
done under the trust deed and scheme rules
- a
trustee does not perform one or more of their duties
under trust law or pension legislation.
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The
rules of most pension schemes will protect trustees from personal
loss caused by an unintentional or negligent breach of trust,
unless it was wilful or deliberate. In some cases, the employer
will provide indemnity insurance for the trustees.
How
We Can Help
We
would be pleased to discuss your role as a company pension
scheme trustee in more detail. We are also able to advise
on the accounting and audit requirements of your scheme.
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of page
For information of users: This material is published
for the information of clients. It provides only an overview
of the regulations in force at the date of publication, and
no action should be taken without consulting the detailed
legislation or seeking professional advice. Therefore no responsibility
for loss occasioned by any person acting or refraining from
action as a result of the material can be accepted by the
authors or the firm.
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C o m p l e t
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