Balance of powers between the trustees and the sponsoring employer
Balance of powers between the trustees and the sponsoring employer

The following Pensions practice note provides comprehensive and up to date legal information covering:

  • Balance of powers between the trustees and the sponsoring employer
  • What is the balance of powers?
  • Key powers in the trust deed and rules
  • Other powers in the trust deed and rules
  • Power of amendment
  • Power to set the employer contribution rate
  • Power to wind up the scheme
  • Power to apportion statutory debts
  • Power to augment or provide additional benefits
  • Power to allow members to take benefits early

THIS PRACTICE NOTE APPLIES TO TRUST-BASED DEFINED BENEFIT OCCUPATIONAL PENSION SCHEMES

What is the balance of powers?

In the context of a trust-based occupational pension scheme, the balance of powers is the term used to describe how the powers in the scheme's trust deed and rules are distributed between the trustees and the sponsoring employer.

Powers may be held:

  1. by the sponsoring employer alone

  2. by the trustees alone

  3. by the sponsoring employer and the trustees jointly

  4. by a third party (eg the scheme actuary)

Powers may also require agreement or consultation with another party.

The balance of powers is usually determined by the sponsoring employer when the scheme is established and the trust deed and rules are drafted. Changes made to the trust deed and rules while the scheme is ongoing may alter the balance of powers between the trustees and the sponsoring employer.

The balance of powers varies from scheme to scheme and some powers are more important than others. Powers which affect the costs of the scheme to the sponsoring employer are usually held by, or require the agreement of, the employer (eg the power to amend the benefit structure or wind up the scheme). Powers which are used regularly in running a scheme are generally held by the trustees (eg the power to allow members to exchange pensions for a lump sum).

Trustees and sponsoring employers may

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