Managing conflicts of interest in pensions

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

  • Managing conflicts of interest in pensions
  • Types of conflicts
  • Circumstances in which conflicts may arise
  • Methods of managing conflicts
  • Confidentiality
  • Duty of company directors to avoid conflicts of interest
  • The Pension Regulator's guidance
  • Understanding the importance of conflicts of interest
  • Identifying conflicts of interest
  • Evaluation, management or avoidance of conflicts
  • More...

Managing conflicts of interest in pensions

THIS PRACTICE NOTE APPLIES TO TRUST-BASED OCCUPATIONAL PENSION SCHEMES

Pension scheme trustees have a duty to act in the best interests of the scheme's beneficiaries. However, trustees may owe duties to other parties or have personal interests which conflict with that duty.

It is a general principle of trust law that trustees should not put themselves in a position where their duty to act in the best interests of beneficiaries conflicts with duties that they owe to other parties or with their personal interests. If trustees make decisions while subject to a conflict of interest that has not been appropriately managed, there is a risk that those decisions may be challenged by scheme members or overturned by the courts. It is important that the members of a scheme should perceive a conflict or potential conflict as having been properly managed.

The directors of a company that acts as a trustee of a scheme may also be subject to conflicts of interest.

Company directors have a statutory duty to promote the success of the company for the benefit of its shareholders. Where trustee company directors also act as directors of the sponsoring employer, their duty to promote the success of the employer may clash with their duties in carrying out the functions of the trustee board.

Under the Companies Act 2006, company directors have

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