Q&As

Does a scheme's exoneration and indemnity clauses protect trustees of an occupational pension scheme from personal liability?

read titleRead full title
Published on LexisPSL on 18/11/2013

The following Pensions Q&A provides comprehensive and up to date legal information covering:

  • Does a scheme's exoneration and indemnity clauses protect trustees of an occupational pension scheme from personal liability?
  • Exoneration clauses
  • Indemnity clauses
  • Exception for investment functions
  • Statutory protection

Does a scheme's exoneration and indemnity clauses protect trustees of an occupational pension scheme from personal liability?

A scheme's exoneration and indemnity clauses will protect trustees from personal liability but that protection will not apply in all circumstances.

Exoneration clauses

An exoneration clause, if effective, will mean that a trustee is not personally liable for acts or omissions which are covered by the clause. However, the exoneration clause is unlikely to apply in cases of fraud, dishonesty or deliberate breach of trust and may also exclude liability for gross negligence. In the case of professional trustees who are paid for their services, the exoneration clause may not cover any liability for negligence. In addition, trustees cannot be exonerated for civil penalties or fines for breach of legislation, and the exoneration clause will not protect them from third-party claims, ie claims from persons who are not a party to the trust (eg the scheme administrator or actuary).

The court will construe an exoneration clause strictly, and the burden of proof is on the trustees to show that an act or omission is covered by the clause. You should check the wording of the clause to see how widely it is drafted.

Indemnity clauses

An indemnity clause will provide that claims for liability against the trustees will be met by the employer or out of scheme funds but is unlikely to apply

Related documents:

Popular documents