Running a pension scheme
Responsibilities of trustees of occupational pension schemes
Defined benefit and occupational defined-contribution pension schemes are run by their trustees, whereas group personal pensions or stakeholder arrangements are normally run by the pension provider.
In defined benefit and occupational defined-contribution schemes, the specific powers and duties of trustees will be contained in the trust deed and the scheme rules. Trustees must run the scheme in accordance with the trust deed and rules for the benefit of its beneficiaries - including members and in certain circumstances the employer too - without being swayed by the interests of the business.
At least one third of trustees must be nominated by the members. The others are normally appointed either by the employer or by existing trustees. To qualify for appointment, they must be over the age of 18, and may be drawn from:
- scheme members
- professional trustees or professional trustee companies
- the employer
- a business associated with the scheme
Member-nominated trustees can only be removed if all the other trustees agree - or if action is taken against them by the Pensions Regulator or the courts. All trustees, including those nominated by the employer, must act in the interests of the schemes' beneficiaries (including members and in certain circumstances the employer), rather than those of the company.
Trustees must be adequately trained in their duties, which include:
- ensuring the scheme is registered
- paying any levies due - eg to the Pensions Regulator
- holding meetings and keeping records of decisions and transactions
- keeping financial and member records
- appointing professional advisers
- establishing investment policy and appointing investment advisers to implement it
- providing information to members and beneficiaries
- sorting out member disputes
Trustees have particular responsibilities when things go wrong. For example, if the employer frequently fails to pay contributions on time, the trustees are obliged to notify the Pensions Regulator. And when a scheme is 'wound up' - terminated as opposed to closed to new members - with the assets being used for the benefit of members, the trustees are responsible for:
- notifying the tax authorities and the Pension Tracing Service
- obtaining professional advice to ensure that the scheme's assets are accounted for
- providing information to members and beneficiaries, until the process is completed
Some forms and returns must now be filed online using the HM Revenue & Customs (HMRC) Pension Schemes Online service. This includes notification of winding up a registered pension scheme.
If trustees fail in their duties, they may be subject to fines by the Pensions Regulator, or may even be held liable for scheme losses. The Pensions Regulator also has the power to suspend, remove and prohibit trustees, in certain circumstances where the relevant conditions are met.