There are currently no formal qualifications or regulatory mechanisms used to check whether a trustee has sufficient knowledge and experience to manage a pension trust fund and deliver trustee services. As such the process for selecting a professional trustee will largely come down to common sense on the part of those appointing the trustee (to determine conflicts of interests and potential skills and expertise required) and the trustee him/herself (to train on a voluntary basis in accounts, finance, and pensions law for example).
The Pension Protection Fund is the statutory body which regulates pension scheme wind ups, and as such its model of selecting trustees to perform trustee services as part of its assessment phase for considering whether or not to take on an insolvent or failing pension scheme is useful as a guide to understanding what might be the best practice in selecting a professional trustee. There is an assessment phase known as the ‘PPF assessment’ because only certain schemes will qualify for compensatory awards and regulation as part of the Pension Protection Fund. This is because Parliament necessarily had to limit the number of members of occupational pension schemes who would be eligible for compensation, given the numbers of schemes which failed as the global recession triggered by the investment and banking crisis, including in the pensions sector, surfaced.
The most striking element of going about appointing trustees, as PPF practice indicates, is the assessment of trustee services based on their particular experience and field of expertise. This is particularly in light of the array of investment strategies and portfolio structures which underpin the range of occupational schemes operational. Pension scheme wind up constitutes an area of trustee services in itself, and appointing trustees to perform the duties and discretions inherent in trust administration and wind up will largely entail a careful due diligence of the work a professional trustee has previously carried out in this area. It will be crucial to look at the innovations trustees have made in the past in terms of approaching unexpected problems in the complex process of winding up a trust. Each trust will present different issues if it has become untenable, and members will expect a trustee to be able to come up with creative solutions which satisfy the spirit of the trust, and protect as far as possible the interests of beneficiaries even as the pension fund is in crisis.
Above all, it is important to realise the nature of a trust wind up, as does the PPF assessment of insolvent trusts. This really is an emergency situation, albeit one which takes a great deal of time and careful analysis and administration to bring to a successful end. The criteria taken into account in determining what are essentially the guardians of members’ interests above all else, including the interests of the employer company and prospective creditors, will be crucial in determining how well members survive out of the crisis of insolvency; an issue facing increasing members of occupational pensions schemes as global economic conditions for the pensions sector remain unsettled.
This is a guest post and views expressed here are entirely of the author. FinanceNet takes no responsibility for the content of external sites linked to from this page.
No related posts.
Comments are closed.
