The trustee model

Changes the government is pursuing would make all DC schemes function a little more like trust-based schemes although improvements are proposed for these too (see page 78). They are run by a board of trustees responsible for ensuring that the pension scheme is run properly and that members’ benefits are secure. A trustee is a person (or company) acting separately from the employer, who holds assets in the trust for the beneficiaries of the scheme.

Trustees act within a legal framework, in particular the law of trusts, which define a trustee’s fiduciary duties. These involve acting in line with the trust deed and rules, and in the best interests of scheme beneficiaries. Trustees also follow specific UK pensions laws (in particular the Pensions Acts 1995 and 2004) and regulations, supported by Codes of Practice issued by the Pensions Regulator, and through European law and decisions of the European Court of Justice.

Trustees should be fit and proper to carry out their duties (Occupational Pension Schemes (Trustee Knowledge and Understanding) Regulations 2006 (Regulation 3) and Code of Practice 13). That means they are expected to act honestly and with integrity, competence, capability, and financial soundness. Breaches of trust law, law and criminal convictions are among issues taken into account in deciding on fitness. Generally, anyone aged 18 years and over and legally capable of holding property, is eligible unless disqualified by a criminal conviction, bankruptcy or other impediment (www.thepensionsregulator.gov.uk/guidance/guidance-for-trustees.aspx).