Protecting Trustees and Pension Schemes
This edition of the OPDU Report features articles by the speakers at OPDU’s Annual Risk Conference last March.
The keynote speech given by Robert West of Baker and McKenzie LLP focused on the main risks faced by pension schemes and trustees and how these have increased over the years. The Conference then focused on the biggest single risk facing DB Schemes and their members, employer covenant risk and how this can best be measured and managed.
The Conference then moved on to the “Do’s and Don’ts” of investment both from the perspective of DC schemes and DB funds. Bill Galvin, Chief Executive of The Pensions Regulator then told us what the Regulator expects from schemes and their trustees. Our session in pension scheme administration focused on common problems, how to address them and how to improve standards.
The final session reviewed “What can go wrong – The lessons from Claims”, “Do’s and Don’ts for Companies and Trustees” and the various protections for trustees against claims. Indemnities, exoneration clauses, the protection offered to directors of corporate trustees and statutory protections are all valuable protections for trustees against claims but they cannot always protect trustees in all circumstances. Even when trustees are protected, they may have to incur very substantial legal expenses to avoid personal liability or in protecting the scheme assets. Also even when trustees are protected, the costs of losses involved in these claims may then fall on the scheme or the sponsoring employer, or else on members whose justifiable claims may not be met in these circumstances. A well designed insurance policy sitting in front of these other protections will protect the trustees and also the legitimate interests of schemes, sponsoring employers and members.
As I write this piece in late September equity markets have plummeted, bond prices and therefore liabilities and annuity prices have risen. Trustees and sponsoring employers have found the funding levels of their DB Schemes have fallen significantly unless assets have been matched with liabilities. Members retiring from DC Schemes are likely to receive significantly lower pensions. The pension world is full of risks!
On 1st March 2012 OPDU, with its underwriters ACE, will be holding its next Annual Risk Conference. There will be much to discuss! I look forward to seeing many of you there.
OPDU Advisory Council
OPDU Advisory Council
OPDU protects pension schemes by providing unique Pension Trustee Liability insurance cover to trustees, administrators and sponsoring employers.
Pension Schemes holding total combined assets in excess of £180 billion have joined OPDU.