Business Reporter Article by Jonathan Bull, OPDU's Executive Director : A policy that protects

Trustees of occupational pension schemes have an increasingly difficult job to do with the expansion of the regulatory and legislative burden following the Maxwell debacle

This is also borne out by the growth in claims that demonstrates that errors can occur in even the best managed schemes – particularly in the increasingly dominant environment of defined contribution schemes.

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.

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 that lifetime insurance cover is available to provide this protection.

Many trustees will have the benefit of clauses within 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.

Insurance plays an important role in protecting trustees, pension scheme assets and the balance sheet of the sponsoring employer. By purchasing a properly drafted insurance policy, trustees can be confident that they have protection against the liabilities that might arise in performing their duties, while also giving members comfort that their interests are being looked after properly in preserving the scheme assets, which is particularly important today when deficits are common.

Jonathan Bull is executive director at OPDU Limited

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