I’m a Trustee…Help Me!
The Pensions Acts of 1995 and 2004 impose onerous responsibilities and requirements on corporate pension scheme trustees.
They are expected to be familiar with their own schemes’ rules and documentation, have an understanding of the law concerning trusts and pension schemes in general and understand the principles of funding and investment. Many individuals who became trustees of pension schemes when the responsibilities were less demanding may be forgiven for wondering why they are now expected to be experts on pensions law, trusts and investment strategies.
2006 has been a difficult year for trustees, as not only have they had to address the issues of Pensions Simplification, (which in my view was nothing of the sort), but they now have to contend with the new age discrimination regulations. If any trustee is in any doubt about their responsibilities they should look at the Foundation Indicative Syllabus at www.thepensionregulator.gov.uk/ pdf/tkuindicativesyllabus.pdf My advice would be to make sure you are sitting down at the time!
A recent report from the Pension Regulator stressed that the governance of many smaller occupational pension schemes was not good when compared to larger schemes. Trustee training for schemes with less than 1,000 members was particularly poor. This is hardly surprising, as employers with massive pension schemes generally have resources to match. Pension schemes need to be run efficiently to safeguard the interests of the members, but is it really practical for a scheme with 75 members to jump through the same hoops as a scheme with 10,000 members? I would say not, however the Pension Regulator would certainly disagree with me.
Pension schemes have no option but to comply with the Regulator’s requirements, no matter how onerous they are and how much they impact on the day to day running Employers and trustees cannot ignore the situation, but they do need to consider their position very carefully. Not all schemes need to comply with all the trustee requirements. For example, small self-administered pension schemes are exempt, but only if the rules state that all trustee decisions are unanimous. Strangely, group personal pension schemes are not subject to the same requirements as occupational schemes for the simple reason that there are no trustees.
The trustees of many occupational pension schemes have concluded the responsibilities are too onerous and have changed to group personal pensions instead. The procedure is relatively simple; the existing scheme is discontinued and contributions are paid instead to a group personal pension scheme. The old scheme is then wound up and the transfer values paid to either the new personal scheme or to special buy-out policies. If the correct procedure is followed the pre April tax-free cash entitlement is preserved. This is the principle, but the reality is as ever a little more complicated! Care is needed, as some older pension schemes can have penalties for early discontinuance and many occupational schemes offer guarantees that may be lost on transfer.
CLB Coopers Financial Planning Limited has the knowledge and experience to provide employers and trustees with expert advice and can if required offer a comprehensive replacement and wind up package.
For an informal discussion about your own situation contact Stewart Tomlinson at stomlinson@clbcoopers.co.uk