Many employers offer their staff an opportunity to save for their retirement through an occupational (or company) pension scheme.
Those employees who join the scheme need to have confidence that the scheme is being well run.
The role of pension scheme trustees is very important in ensuring that the scheme is run honestly and efficiently and in the best interests of the members.
We outline in this factsheet the main responsibilities of occupational pension scheme trustees.
Background
The Pensions Act 1995 (the Act) brought about a number of major changes to the way occupational pension schemes are run. The 2004 Pensions Act brought about further change and introduced, in April 2005, The Pensions Regulator (TPR) as the UK regulator of work-based pension schemes.
TPR has an important role in the pension sector. Its objectives are to:
• promote the benefits of members of work-based pension schemes
• promote the good administration of work-based pension schemes and
• reduce the risk of situations arising which may lead to claims for
compensation from the Pension Protection Fund.
TPR has two core activities that underpin its regulatory approach:
• the gathering of detailed and up to date information about schemes
and how they are being run and
• a risk assessment of every pension scheme.
In fulfilling its role, TPR produces important guidance for those involved with pension schemes including trustees as well as auditors and actuaries. This guidance is available from TPR’s website (www.thepensionsregulator.gov.uk).
Pension Scheme Classification
Employers can help promote retirement benefits for their employees in a number of ways including:
• occupational schemes
• group personal pension schemes
• stakeholder schemes.
An occupational pension is an arrangement an employer uses to provide benefits for their employees when they leave or retire.
There are two main types of occupational pension scheme in the UK:
• salary-related schemes
• money purchase schemes.
Whatever the type of scheme, it will usually have trustees.
The Role of Trustees
Most company pension schemes in the UK are set up as trusts. There are two main reasons for this:
• it is necessary in order to gain most of the tax advantages
• it makes sure that the assets of the pension scheme are kept separate
from those of the employer.
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. From April 2006 the law requires trustees to have knowledge and understanding of, amongst other things, the law relating to pensions and trusts, the funding of pension schemes and the investment of scheme assets.
The law also requires trustees to be familiar with:
• certain pension scheme documents including the trust deed and rules
• the statements of investment principles and funding principles.
A code of practice has been issued by 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.
Trustees' ...
