Pension Trustees Liability

Seize the Day - Time to Consider!

Why do you need Pension Trustee Liability Insurance?

The role of Trustee is complex; Pension Scheme Trustees in particular have onerous duties and are entrusted with making decisions which potentially affect hundreds of members. A trustee can be held personally liable for any loss arising out of these actions or lack of them. Their duties and responsibilities were clarified under the Pensions Act 2004 which introduced a new statutory requirement for Trustee Knowledge and Understanding.

Facing these onerous liabilities a prudent Trustee should consider at least getting a quotation for Pensions Trustee Liability. In our experience Trustees are generally surprised at how cheap the covers can be. By using Mitchell Charlesworth Insurance Solutions you will be able to demonstrate that a competitive price was sought and that ‘value for money’ has been secured for both the scheme and its members. Remember that, if the rules permit, the premium can be paid from the Fund. If drafted and sourced correctly, a Pension Trustee Liability policy will be a cost effective way of protecting Trustees, the scheme, the sponsoring employer and their employees.

What is covered under a Pension Trustees Liability Policy?

Pension Trustees Liability insurance protects Pension Funds and their Trustees against claims made by third parties for matters including Breach of Trust, Maladministration and Wrongful Acts involving the actions of the Trustees to the Pension Fund. The policies also provide cover for any costs incurred in defending claims.

When should cover be purchased/taken out?

Pension Trustees Liability insurance should be taken out sooner rather than later. When Trustees act for Pension Funds they become liable for any actions undertaken (or, possibly, actions not undertaken) and whilst the Fund is still open a Live Policy taken out on a yearly basis can protect them. Even when a Fund is ‘wound-up’, the Trustees’ liability can continues for up to 12 years.

Run-Off cover should be purchased when winding up a Fund to protect the Trustee’s continuing liability.

Why do Trustees need insurance at all, given that most Trust Deeds contain exoneration and indemnity clauses?

Both of them can work, and both of them have worked, the trouble is that as with any sort of contract, including insurance contracts, the exoneration clause in particular needs to be very carefully and
finely tuned to what people want. If there is a dispute as to whether or not the clause applies there can be areas of grey rather than black or white.

Should the matter find its way to a Court, a Judge might take a disparate view on what the actual wording says. There could be an intention to provide exoneration but in fact the words on the page may not reflect that, so the Trustee can be left high and dry.

The indemnity principle, the indemnity clause or the letter of indemnity (as they can sometimes be called) relies on the Sponsoring Employer still being around (i.e. solvent) to honour that indemnity. In today’s climate, that is not a certainty.

How much will a Pension Trustees Liability Policy cost me?

Mitchell Charlesworth Insurance Solutions can offer pension trustee liability as part of a directors and officer policy from as little as £492.75 per annum, dependant on turnover of business and pension pot size.

Who should I contact for a quote?

For further information, call Richard Gorst or Carrie Arnold on 0151 423 7500.

Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales and authorised and regulated by the Financial Conduct Authority for investment business