Trustee insurance in pensions

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

  • Trustee insurance in pensions
  • Other protections available to trustees
  • Why would a trustee need trustee insurance?
  • Scheme wind up
  • Insufficient statutory protection under the Trustee Act 1925, s 61
  • Person standing behind an indemnity may not be good for the money
  • Scope of exoneration/indemnity clause uncertain or too restrictive
  • Insufficient Directors’ and Officers’ (D&O) insurance
  • Trustees’ power to buy insurance cover
  • Amendment to trust deed and rules
  • More...

Trustee insurance in pensions

Other protections available to trustees

Despite dire warnings about the onerous nature of trusteeship, the liabilities imposed by the Pensions Regulator and the pitfalls inherent in trusteeship, pension trustees generally enjoy a high level of protection under both statute and the governing documentation of their pension scheme. This includes:

  1. the Trustee Act 1925, s 61 under which a trustee may be relieved of liability for breach of trust if they have acted honestly and reasonably and ought fairly to be excused from that breach

  2. the Trustee Act 1925, s 27 (TA 1925) which, by means of a notification arrangement, protects trustees from unknown beneficiaries on a scheme wind up

  3. exoneration clauses in trust deed and rules which exempt trustees from personal liability for certain acts or omissions

  4. indemnity clauses in trust deed and rules which ensure that certain liability claims against trustees are met by another party or source

  5. indemnities by the plan sponsor

Trusteeship undertaken via a company enjoys a further layer of protection under the Companies Act 2006. By becoming a director of a corporate trustee, a trustee director benefits from the protection of the corporate veil. Attempts to pierce that veil have been broadly unsuccessful, save in instances of dishonesty.

For further information, see Practice Notes: Trustee liability and protection in pensions and Discharge for trustees on scheme wind-up.

Even with the

Popular documents