Conflict consultation
28 Mar 08
The Pensions Regulator has issued draft guidance to trustees for consultation
by Katie Kerr
Last month, writes Katie Kerr, I reviewed conflicts of interest that can occur for a company director who is also a pension fund trustee (CA Magazine, March 2008 “Conflicting interest”). Since then the Pensions Regulator (TPR) has issued draft guidance to trustees for consultation. Responses are requested by 30 May.
The guidance is based on five “high level” principles.
- Understanding the importance of conflicts of interest: Trustees should clearly understand the circumstances leading to conflict and act in the best interests of beneficiaries. Newly appointed trustees should have training.
- Conflicts policy: Trustees should adopt a policy for identifying, monitoring and managing conflicts and review it regularly. It should be reviewed by the scheme’s legal advisers.
- Identifying conflicts: All trustees on appointment should disclose any conflicts of interest. A register of should be maintained.
- Evaluation, management or avoidance of conflicts: Trustees must decide whether simple disclosure of the conflict is adequate or, whether it requires more active management. Meeting minutes should clearly detail conflicts and record action by trustees. In cases of material conflict, independent legal advice should be sought. If the conflict is too acute or pervasive, resignation of the trustee and appointment of an independent trustee may be the only option.
- Managing adviser conflicts: Trustees should adopt a policy to ensure advice from professionals is independent. Great care should be taken where the trustees use the same adviser as the employer.
The guidance is unsurprising but provides a welcome focus and recognises what has been an issue for trustees for some time. It has been criticised for being too wide-ranging but may provide useful for trustees starting to consider a review of their conflict procedures although it is only a draft and therefore liable to change.
KATIE KERR is an associate with solicitors Biggart Baillie LLP, specialising in pensions law.