By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
We continue our look at pensions in Money Matters this week, after starting to put the spotlight on pension schemes a fortnight ago.
The role of trustees is hugely important in any company pension scheme.
To explain further . . .
A trustee is a person or company, acting separately from an employer, who holds assets for the beneficiaries of the pension scheme.
Trustees are responsible for ensuring that the pension scheme is run properly and that members’ benefits are secure.
In fulfilling their role, trustees must be aware of their legal duties and responsibilities.
The law requires trustees to have knowledge and understanding of, among other things, the law relating to pensions and trusts, the funding of pension schemes and the investment of scheme assets.
A code of practice has been issued by The Pensions Regulator (TPR), explaining what trustees need to do in order to comply with the law in this area.
Trustees should arrange appropriate training as soon as they are appointed and should then continue with their learning to keep their knowledge up to date.
New trustees have six months from their appointment date to comply with this requirement.
Trustees have a number of very important duties and responsibilities, which include:
- acting impartially, prudently, responsibly and honestly and in the best interests of scheme beneficiaries
- acting in line with the trust deed, scheme rules and the legal framework surrounding pensions
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.
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.
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.
The pension fund is properly invested in line with the scheme’s investment principles and relevant law.
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 and others are provided with information about the scheme and their personal benefits.
Registration, the scheme return and collecting the levy:
TPR is provided with information required by law for the register, that the scheme’s annual return is completed and the annual levy for the scheme is paid.
Where a breach of law takes place and it is likely to be materially significant to TPR, trustees and indeed others involved in running the scheme have a legal duty to report the breach to the regulator. Code of practice 01, ‘Reporting breaches of the law’ provides guidance on the factors that should be considered when deciding to make a report.
In addition, trustees also have to notify TPR when particular scheme-related events happen. These are known as ‘notifiable events’, also the subject of a code of practice.
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 investment, legal and administrative information about the scheme
- actuarial information, if applicable
- governance information, if applicable
- the audited accounts and audit report.
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 or does not perform them with sufficient care.
The rules of the pension scheme might protect trustees from personal liability for a loss caused by breach of trust, except where it is due to their own actual fraud.
In some cases, the employer may provide indemnity insurance for the trustees.
At Clay Shaw Butler, we produced regularly updated Factsheets on pensions and other tax matters.
Get in touch if you have any queries.
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