Insurance for Pension Fund Trustees

MFL Professional can assist pension fund trustees by advising on and sourcing comprehensive insurance cover written specifically to cater for the needs of individual trustees and to protect the assets of both the pension scheme and the company.

We issue regular bulletins pertinent to pension trustees, though as a brief introduction, we would highlight areas where we can provide assistance.

Historically, the insurance cover available for pension trustees was limited; often this may have simply consisted of an extension to the sponsor’s Directors’ &Officers’ Liability policy with considerable obstacles to making a successful claim. The market has since changed and at MFL Professional we would look to provide a policy specifically written with pension trustees in mind but also covering in-house pensions personnel (including pensions directors and scheme managers) and the sponsor itself.

Legislation over the last 20 years or so mean that the responsibilities imposed on Trustees are now more onerous and the personal risks considerable, with increased expectations of the Pensions Regulator in terms of good scheme governance adding to the burden. Therefore, careful consideration of the insurance protection available ought to be given. Set out below you will find a brief summary of Trustee Risks.

We would highlight one area of potential misunderstanding, i.e. whilst, we appreciate that some trustees might feel they can rely upon exoneration and indemnity clauses in the deed and rules, we would point out why, without a good insurance cover, you will not have the complete protection you need:

  • You will not be protected for losses arising from breaches of trust relating to investments nor for civil fines and penalties;
  • nor will the clause protect you when the sponsor no longer exists.
  • Resigning as a trustee will not protect you from acts done when you were appointed. See below under Risks

Trustee risks

As a Trustee, you will be aware that you are exposed to some significant personal risks. Whilst there is probably no single place where you can obtain a full list of all the risks involved, the obligations arise from a range of areas, as follows:-

  • Scheme trust deed and rules.
  • Law relating to trusts: legislation and case law.
  • Specific pension’s legislation.
  • Other law (e.g. contract, protection and derivatives law).

Risks

  • You are jointly and severally liable for the scheme with your co-trustees which means that even if you are innocent, there could be a liability for actions of fellow trustees.
  • You are liable for civil penalties and fines.
  • Crime where there is no fraud:
  • Breach of employer-related investments;
  • Failure to provide data to the Pension Regulator.
  • Using scheme assets to pay civil fines and penalties.
  • As mentioned above, the exoneration clause will not protect you from liabilities to third parties such as advisers and investment managers.
  • The indemnity clause from the scheme sponsor will only be as strong as the financial strength and covenant it can provide to you. This could be weak or non-existent if the sponsor no longer exists.

The above examples show why you ought to seek protection directly from insurance cover which is provided independently of the sponsor.

Accordingly, working in association with The Occupational Pensions Defence Union, MFL Professional would look to provide you with market leading protection whether your scheme is ongoing  (Pension Trustee Liability cover) or winding-up (Discontinuance cover).

This association will ensure the protection afforded by these policies  will remain up to date and reflective of the industry needs through the work of both an  Advisory Council (made up of  industry leading experts, academics, scheme managers and trustees) and close liaison with the Pensions Management Institute, Association of Member Nominated Trustees, the Pensions Policy Institute and the National Federation of Occupational Pensioners.

Within this section of the website, you will find our regular technical bulletins on salient topics which you may find useful, whilst as a matter, of course, we do mail periodic items as part of a regular programme.