Pension Trustees Liability
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Trustees are faced with a greater number of statutory duties brought into force by the Pensions Act 1995.
A duty of care was subsequently imposed on trustees under the Trustee Act 2000. More recently, the Pensions Act 2004 introduced a number of changes to the duties and obligations of trustees, including a new statutory requirement for ‘knowledge and understanding’.
Trustees who breach their duties or responsibilities may place their personal assets at risk should they be found to be personally liable for any loss experienced as a result of their actions. Trustees may also incur criminal penalties through acting improperly or fraudulently, or civil penalties by contravening statutory requirements.
Pension Trustee Liability Insurance
Pension Trustees’ Liability Insurance is the most comprehensive protection for trustees. The policy works alongside existing indemnification provisions, by reimbursing the employer or pension scheme if indemnity is provided or indemnifies the trustee directly if indemnity is unavailable.
A typical Pension Trustees’ Liability policy covers:
- Past, present and future trustees (including directors of corporate trustee companies)
- The pension scheme for reimbursement of loss on account of exoneration provided to trustees
- The sponsoring employer company for reimbursement of loss on account of indemnification provided to trustees
- The sponsoring employer for direct claims
- Breach of trust
- Breach of duty
- Breach of statute
- Errors and omissions
- Misstatements and misleading statements
- Costs of legal representation at an investigation by the Pensions Regulator or equivalent body
As a contractual means of indemnification, separate from the company’s and the scheme’s assets, a Pension Trustees’ Liability policy is the only protection that can truly be relied upon. Free from conflicts of interests and inter-company politics, insurance companies can take a proactive stance in defending allegations of wrongdoing or investigations into conduct.
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