Pension trustees face 'personal financial risk'

Pension fund trustees face significant personal financial risk for up to 20 years on the basis of decisions taken now, a conference in Dublin heard last night.

Trustees, often nominated by work colleagues or employers to oversee the performance of occupational pension schemes, take on onerous duties and responsibilities, Matheson Ormsby Prentice partner Mr Brian Buggy said.

Addressing an audience of trustees in Dublin, he said lay trustees would be well-advised to limit their exposure to claims in relation to fund performance by using "limitation clauses" in pension scheme documents.

Such clauses were quite usual and reflected the fact that lay trustees were not expected to have specialist knowledge or expertise.

It would be unreasonable to expect lay trustees to put themselves forward without such clauses, he said.

"However, the law does expect that lay trustees will take care and will always act honestly in the best interests of members of pension schemes," said Mr Buggy.

No limitation clause would protect them if they failed to do so.

Coyle Hamilton director Mr John Barry advised trustees to protect themselves with liability cover.

He said such cover was vital given that trustees had unlimited personal liability to claims taken up to 20 years after the event.

"In the absence of insurance, trustees will very often have to fund their defence costs initially until a claim has been adjudicated on and it can then be established whether they are entitled to be indemnified out of fund assets," he said.

However, he acknowledged that "off-the-shelf" trustee liability insurance policies "without exception have serious defects and should be handled with asbestos gloves by trustees".

Mr Barry said that there was a question mark over whether it was appropriate to use pension funds assets to pay for "the substantial awards and defence costs that arise with such claims".

Mr Paul O'Brien, associate director with KPMG, told the conference that the recent turbulence in global equity markets only highlighted the need for trustees to communicate regularly with members of their pension scheme about the state of their fund.