What is a Pension Trustee
Let Me Tell You What a Pension Trustee Is?
A Pension Trustee is a person who holds and looks after pension assets for the benefit of members and their dependents is called a trustee. Although assets are held in the name of the trustees, they do not belong to them. The conditions of the trust under which the pension scheme is set up are detailed in a legal document called the trust deed and rules. It sets out who can join the scheme, what the benefits are and what contributions are paid.
The duties of pension scheme trustees under trust law include:
A trustee, who is negligent, does not act in good faith or breaks the rules of the trust can be sued by the beneficiaries. They can be held personally liable for the entire amount of any loss that has occurred. Trustees must take great care to make sure that all information received in their capacity as trustees is treated in the strictest confidence and only used for the purposes for which it has been given. A trustee does not have the power to negotiate or vary the terms and conditions of the scheme. Trustees can only do what is set out in the trust deed and rules. They cannot act as a representative of the employer or the members.
Who cannot be a Trustee?
The duties of pension scheme trustees under trust law include:
Administering the trust in accordance with trust law, all other law and the terms of the trust deed and rules
Acting in the best interests of beneficiaries
Acting fairly between beneficiaries
Acting prudently and diligently
Exercising care and utmost good faith in all trustee duties
Seeking professional advice as necessary
Supervising those to whom functions have been properly delegated
Not making personal profit from the trust
Being aware of possible conflicts of interest
A trustee, who is negligent, does not act in good faith or breaks the rules of the trust can be sued by the beneficiaries. They can be held personally liable for the entire amount of any loss that has occurred. Trustees must take great care to make sure that all information received in their capacity as trustees are treated in the strictest confidence and only used for the purposes for which it has been given. A trustee does not have the power to negotiate or vary the terms and conditions of the scheme. Trustees can only do what is set out in the trust deed and rules. They cannot act as a representative of the employer or the members.
Who cannot be a Trustee?
The Pensions Act states that a trustee cannot be someone who:
is an undischarged bankrupt (currently certified bankrupt)
has made an arrangement with creditors and has not fulfilled the obligations under that arrangement
has been convicted of an offence involving fraud or dishonesty
is restricted, under Section 150 of the Companies Act, from being involved in the formation or promotion of a company for a defined period of time.
The trustees of most pension schemes do not actually carry out the day-to-day business of the scheme. In some cases, they appoint a person within the company to do this. More often, they appoint a pensions consultant, a professional administrator or a life assurance company.
Pensions administration has a wide variety of activities, including:
Contact with external authorities (e.g., the Revenue Commissioners and the Pensions Authority)
Contact with members
Overseeing the scheme accounts
Providing documents to others.
Even when the day-to-day administration is delegated, the trustees are still responsible for the scheme. They must ensure that all the above duties and those set out in the Pensions Act are carried out
Trustees’ duties under the Pensions Act
The Pensions Act clearly sets out the duties and responsibilities of trustees. There is a high degree of overlap between trustees’ duties under the general principles of trust law and their duties as prescribed in the Pensions Act.
The trustees’ duties under the Pensions Act are explained below.
From 1 February 2010, every trustee must undertake trustee training in accordance with the Pensions Act, and are required to receive training on:
(a) The Pensions Act, the regulations made under it and any other law that affects the operation of their scheme or trust RAC
(b) The duties and responsibilities of trustees generally.
Trustees are required to receive training within six months of their appointment and at least every two years thereafter.
Where a person was already a trustee before 1 February 2010, the training has to be completed before 1 February 2012. They must then undertake training at least every two years thereafter.
An employer who operates a pension scheme is obliged to arrange for the scheme trustees (and, in the case of a trustee that is a body corporate, for all the directors of that body corporate) to receive appropriate training.
However, an employer is not required to arrange appropriate training for either (a) A pensioner trustee, or (b) A professional trustee.
Registering the scheme
Trustees must register their scheme with the Pensions Authority and pay the annual fee. Schemes must register within one year of their start date.
A pensions consultant, administrator or life assurance company doing the day-to-day running of the scheme will usually arrange for registration and payment of fees. However, it is the responsibility of the trustees to ensure that their scheme is registered, with the registration details updated at least once a year and the annual fee paid.
Ensuring that contributions are received
The trustees shall make sure, as far as is reasonable, that contributions payable by the employer and members are received. One way to do this is to agree with the employer procedures and dates for the payment of these pension contributions. The dates may be specified in the scheme rules or, for defined benefit schemes, in the actuary’s valuation report, and should be adhered to. If dates are not specified, contributions should generally be made monthly or quarterly.
The Act also requires the employer to pay contributions within a specified time, except in respect of employers’ contributions to a defined benefit scheme. The Pensions Authority has produced a set of frequently asked questions (FAQs) about the payment of contributions. This is available by contacting the Authority or on www.pensionsauthority.ie.
Investing the funds
The trustees must ensure that the resources of the pension scheme are properly invested in line with investment regulations and the scheme’s trust deed and rules.
Trustees usually delegate the actual investment to a professional investment manager. Nevertheless, the trustees are responsible for monitoring the conduct of the investment manager and the performance of the assets.
If a scheme has not appointed an investment manager, the trustees must show the Pensions Authority that they have appropriate qualifications and experience to assess and advise on investment options, and to make investment decisions. If a trustee who has been approved by the Authority leaves the trust, any new trustee appointed to fill the investment role must get similar approval from the Authority.
Subject to the Pensions Authority’s approval, trustees can also employ an adviser with the appropriate qualifications and experience. An application for approval should be made by the trustees or the proposed adviser. The application form is available on www.pensionsauthority.ie. The Authority’s approval must be obtained before any investment is made.
Trustees are also required to invest the contributions within ten days of the latest date by which the employer should have paid them.
The Pensions Authority has produced a detailed set of frequently asked questions (FAQs) about investment regulations, which is available on the Authority’s website.
Making arrangements for the payment of benefits
The Pensions Act also specifies that trustees should make arrangements for the timely payment of benefits.
A company pension scheme may provide benefits in the following circumstances:
Retirement at or before normal pensionable age or due to ill health
Death before or after retirement
On leaving the company.
Many company pension schemes appoint an agent (e.g., the scheme administrator, the employer or the insurance company) to pay the benefits or arrange for annuities to be bought through a life assurance company. The trustees’ duty is to ensure that beneficiaries are paid regularly and do not have to take unreasonable steps to get their benefits.
In most schemes, trustees may have to decide the distribution and/or method of payment of benefits. For example, the scheme may allow death benefits to be paid to one dependant or split between several dependants. Trustees must find out the full circumstances of each case before making a decision; if in doubt, they should seek professional advice.
Seeing that records are kept
Under the Pensions Act, trustees are obliged to make sure that appropriate membership records and financial data are kept.
Typically, member records will include the member’s name, gender, date of birth, date of joining the company and date of joining the pension scheme, marital status, details of dependants and other beneficiaries, present and past annual salary details, transfer values received and benefits granted, member contributions and additional voluntary contributions (AVCs). Members may be active, deferred or pensioner members and accurate records should be held in every case. Trustees may also find it useful to have the PPS numbers of all members. The type and amount of information kept will depend on the scheme and the types of benefit provided.
Trustees frequently delegate the administration of the scheme (including a collection of contributions) to third parties or the employer and the professional investment managers. However, the overall responsibility of stewardship of the scheme’s assets, transactions and record-keeping rest with the trustees.
Financial records include the trustee bank account, all financial transactions and financial reports received from third parties (e.g., an investment manager). The financial records are frequently kept on behalf of the trustees by an administrator, who may also prepare the accounts for audit.
Preserving or transferring benefits
The trustees must make sure that the necessary arrangements are made for early leavers of the scheme to have their benefits preserved, revalued or transferred to another pension plan. They will also have to accept transfers when new employees join the company pension scheme.
There is further information on the preservation and transfer of benefits requirements in the Pensions Authority booklet ‘How does my pension scheme work?’ This is available on the Authority’s website. Detailed technical guidance notes on ‘Preservation of benefits and minimum value of contributory retirement benefits’ are also available on the Authority’s website.
Checking that the funding standard is met
The trustees of a defined benefit scheme must ensure that the scheme complies with the minimum funding standard (MFS) as required by the Pensions Act.
At least every three years, trustees of defined benefit schemes must provide an actuarial funding certificate (AFC) to the Pensions Authority. This certificate is prepared by the scheme’s actuary and states if the scheme has enough assets to comply with its legal funding requirements. In the annual report, the actuary must also give an opinion on whether or not the scheme continues to satisfy the funding standard. If the scheme does not satisfy the funding standard, a funding proposal to rectify the situation must be prepared within an agreed period of time. This plan must be agreed with the employer and the actuary.
The Act’s provisions on the preparation of the AFC and a funding proposal are detailed and complex. It is important for trustees to have a good understanding of these matters and discuss them in detail with the actuary and/or the scheme advisers.
Further information on the minimum funding requirements is contained in the Pensions Authority booklet ‘How does my pension scheme work?’, which is available from the Authority’s website.
With effect from 1 November 2008, the trustees of every scheme (including large trust RAC schemes) had to appoint a registered administrator to provide various services to the scheme (known as ‘core administration functions’). The ‘core administration functions’ are the preparation of annual reports and annual benefit statements for the trustees, and the maintenance of sufficient and accurate records of members and their entitlements to discharge the above functions. Trustees can appoint themselves as registered administrators provided that they are satisfied as to their competence to undertake the core administration functions and that they have the necessary systems and procedures in place to do so.
Failure by the trustees to appoint a registered administrator will constitute an offence under the Pensions Act.
The Pensions Authority has produced a detailed set of frequently asked questions (FAQs) about registered administrators, which is available on the Authority’s website.
Giving out information
Trustees must make available certain documents and information about the scheme and its operation to members and other specified persons (such as prospective members, spouses of members, other beneficiaries and authorised trade unions that represent members). The general information they must allow to be given out includes:
Details about the setup and rules of the scheme
Certain basic information about the scheme
Details of an individual’s benefit entitlements under the scheme.
Trustees must also arrange for:
Actuarial valuations (in the case of a defined benefit scheme)
Annual audited accounts (if required)
Annual reports to be prepared and made available, subject to certain exceptions and alternatives.
They must also make sure the information is given within the timescales specified in the legislation.
The booklet ‘How does my pension scheme work?’, which is available on the Authority’s website, sets out what information trustees of an occupational pension scheme must provide when this information must be given and how it should be given. More detail on these requirements is provided in the appropriate guidance notes available on the Authority’s website.
Applying equal pension treatment
According to the Pensions Act, which gives effect to EU law in this regard, trustees of company pension schemes, with certain exceptions, must see that their scheme complies with the principle of equal pension treatment.
Originally the Act simply prohibited discrimination on the grounds of gender. However, it now bans pension discrimination on the grounds of:
Membership of the Traveller community.
The principle of equal pension treatment applies to the trust deed and rules of the scheme on such matters as:
Access to the scheme
Entitlement to, and calculation of, benefits
However, it is not a breach of equal pension treatment if schemes fix an age for admission to the scheme or for entitlement to benefits, including setting different ages for employees, or groups or categories of employees, provided that this does not result in discrimination on grounds of gender.
Trustees should have the scheme’s trust deed and rules examined on a regular basis to make sure that they follow the principle of equal pension treatment.
A person claiming a failure of the equal pension principle may refer his/her case to the Equality Tribunal
Guidance notes on equal pension treatment are available from the Authority’s website as well as the booklet ‘A brief guide to equal pension treatment’.
Distributing the resources of the scheme on wind-up
Trustees of a pension scheme that is being wound up must use the assets of the scheme to settle its liabilities without undue delay.
When a decision is taken to wind up the pension scheme, trustees must notify members, their trade unions and the Pensions Authority within 12 weeks of the decision. Trustees have a duty to make sure that members’ pension rights are secured and the wind-up is completed as soon as is practical. Members must also be informed in a reasonable time of their benefit rights and options under the wind-up rules, including who will pay the benefits after wind-up, the address for enquiries and how any surplus or deficit in the pension fund has been dealt with.
There is more information on scheme wind-ups in the Pensions Authority booklet ‘How does my pension scheme work?’ which is available from the Authority’s website.
What is a Master Trust?
A master trust is an occupational pension scheme for multiple non-associated employers, in which each employer is included in a separate section of the master trust arrangement. Although governance and regulatory responsibilities sit with a Master Trust Trustee, participating employers retain the ability to make decisions about contributions.
A master trust offers employers the advantage of a strong governance capability, but with generally lower operating costs and greater simplicity that single employer scheme. Which requires its own trust deed, rules and trustees.
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