The duty of pension scheme trustees to act in the best interests of beneficiaries
Produced in partnership with Michael Uberoi and Saaman Pourghadiri of Outer Temple Chambers

The following Pensions practice note produced in partnership with Michael Uberoi and Saaman Pourghadiri of Outer Temple Chambers provides comprehensive and up to date legal information covering:

  • The duty of pension scheme trustees to act in the best interests of beneficiaries
  • The origin of the duty—Cowan v Scargill
  • The limits of Cowan v Scargill
  • The duty in its modern form—Merchant Navy Ratings Pension Fund Trustees v Stena Line
  • Who are the beneficiaries?
  • Keymed (Medical & Industrial Equipment) Ltd v Hillman
  • Investment and the ‘best interests’ principle
  • The duty in its modern context

The duty of pension scheme trustees to act in the best interests of beneficiaries

It is often thought that pensions scheme trustees owe a duty to act in the best interests of the beneficiaries of the scheme. This Practice Note explores the origins of the so-called duty, its scope and application today.

The origin of the duty—Cowan v Scargill

Cowan v Scargill involved a dispute between the trustees of the Mineworkers’ Pension Scheme. Of ten trustees, five were appointed by the National Coal Board, and five were appointed by the National Union of Mineworkers (NUM).

The issue before the court was whether the NUM trustees were in breach of their fiduciary duties in refusing to approve a proposed investment plan unless it was amended so as to:

  1. prohibit any increase in overseas investment

  2. provide for the withdrawal of existing overseas investments at the most opportune time, and

  3. prohibit investment in energies which were in direct competition with coal

The legal adviser to the Board had advised the trustees that the suitability of an investment was to be judged by reference to financial criteria rather than by its (deemed) acceptability for political or other extraneous reasons. The NUM trustees did not accept this proposition.

Sir Robert Megarry V-C said:

‘The starting point is the duty of trustees to exercise their powers in the best interests of the present and future beneficiaries of

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