Appointment of Pension Trustees
The basic Trustee Act mechanics for the appointment and removal of a trustee apply to the appointment of pension scheme trustees. The pension deed will usually provide for the power of appointment so that statutory default provisions will not generally be required to be used.
There is a statutory power vested in the Pensions Board/Authority to order the appointment of a trustee or a new trustee in substitution or an existing trustee, and vest the scheme assets in that person. The Board may exercise this power in cases of difficulty where no other route is available. Persons interested may appeal against the appointment of a trustee to Court.
The power to appoint a trustee may have a fiduciary aspect in certain contexts, notwithstanding that it might appear to be in absolute terms. The person who makes the appointment, often the employer, must respect the integrity of the trustee and must appoint a trustee for the purpose of doing his bidding. The power is not exercisable in the interests of the employer but in the interests of the scheme members.
A small self-administered scheme must appointment a pensioneer trustee. This is a person approved by the Revenue Commissioners who must give certain undertakings. The undertakings are given for the purpose of ensuring compliance with the scheme rules and in particular, the restrictions applicable to small self-administered pension schemes.
Removal and Suspension of Pension Trustee
The Pensions Authority/Board may apply to Court for an order removing a trustee and appointing a substitute trustee. The Court may order that a trustee who has been so replaced to be disqualified for a period. The Court may exercise this jurisdiction if it determines that the trustee has failed to undertake his duties or has jeopardised the interest of the scheme member.
There is a general power under the Trustees legislation to apply to Court for the appointment of a trustee where it is otherwise difficult or impractical to do so. Vesting orders may be made in respect of the scheme assets.
The High Court may on the application of a Pensions Board suspend a trustee. This may be done where the scheme is the subject of an investigation or proceedings have been commenced for a serious breach of trust. An application may be made to extend the suspension beyond an initial 12-month period. It is an offence to act as trustee, while suspended or disqualified.
Almost any person is qualified to be a trustee. The Pensions Act provides that certain persons are not qualified. They include
• undischarged bankrupts;
• persons who have made insolvency arrangements with their creditors;
• persons convicted of offences of fraud or dishonesty;
• a company, any of whose directors are prohibited from being trustees;
• a restricted director.
A company with appropriate powers may act as a rustee. A professional trustee company may be appointed. It may undertake trustee services on a commercial basis. The company’s officers perform the functions of a trustee.
There may be several trustees, some of whom are professional trustees and some of whom are appointed by the members or the employer etc. Alternatively, the trustees may all be non-professional appointees.
Being a member does not preclude a person from being appointed as trustee. There are requirements for member trustees in the case of larger schemes.
Exceptionally, the employer may act as scheme trustee. This is generally undesirable and is likely to lead to conflicts of interest. The most pointed conflict arises in relation to the investment of pension funds in the employer business, which is likely to be in breach of the trustee’s common law and statutory duties in most circumstances.
Trustees must have certain minimum training, qualifications or experience. The requirement applies to all occupational pension schemes other than those providing death in services benefits only. It applies to the directors of corporate trustees. Pension trustee training has been mandatory since 2010. The initial training was required to be completed by 2012. It must be renewed / updated bi-annually thereafter.
An employer is required to arrange appropriate trustee training for all new and existing trustees. An employer must arrange trustee training for each individual trustee within six months of their appointment and at least every two years thereafter. Trustees must themselves comply with the training arrangements provided. A breach of the trustee training requirement is an offence. An on-the-spot fine may be levied.
The employer is not required to provide training in relation to pensioneer trustees and professional trustees. They are expected to organise their own training.
The trustees need not have the more extensive investment qualifications provided that they contract with competent investment managers who are authorised to provide the relevant investment services in respect of the scheme assets. They may alternatively satisfy the Pensions Authority that they have the requisite qualification and experience. It is sufficient that one trustee has the requisite qualifications and experience
Where an occupational scheme has more than 50 qualified members, the members are entitled to appoint representatives as trustees. The rights take effect only when invoked. There is a mechanism for the election of the trustees. Once the trustees have been selected, a further selection process applies on termination of their period of office. Their term of office is six years.
The right to appoint a trustee also applies to schemes that are directly invested, with 12 or more qualified members. Schemes are directly invested when their assets, for example. in shares and property, are held directly or through a bare nominee, rather than through an insurance company or other external managed fund.
There are two arrangements, a standard arrangement and an alternative arrangement. The standard arrangement involves an election. The alternative arrangement involves employer nomination and member approval.
There are certain inflexibilities with the statutory regime for the appointment of member trustees. It is generally preferable for an employer to appoint a member trustee other than under the default statutory provisions.
Standard and Alternative Arrangements
The procedure to appoint trustees can be initiated by 15% or more of the qualified members, or by an authorised trade union representing 50% of the active members. Active members are those in reckonable service, for pension purposes. The employer may, but need not, initiate the process
On receipt of a request, the employer must appoint a returning officer. He must direct the trustees to hold a poll by qualified members. Alternatively, he may hold a preliminary poll to give the choice of an election or an alternative arrangement.
The Regulations require that the number of member-elected trustees should equal the number of employer nominated trustees, subject to a minimum of two elected members.
The standard arrangement involves the election by secret ballot of member nominated trustees who are nominated by at least 10 qualified members or 10% in value.
Under the alternative arrangement, there is no election. The employer nominates named members to be appointed under a proposal and submits them to the members for approval by way of a preliminary poll. The employer specifies the members’ names together with the particulars of the employer nominated trustees and the chairperson.
References and Sources
Irish Pensions Law & Practice Buggy, Finucane & Tighe 2nd Ed (2005) Ch 4,14
Pensions; Revenue Law and Practice (ITI) Dolan, Murray, Reynolds, McLoughlin (2013)
Trustee Handbook the Pensions Authority 5th Ed 2016
Statutory Guidance the Pensions Authority (Various)
Pensions Law Handbook 12 Ed Nabarro Nathanson Bloomsbury
Corporate Insolvency 6e: Employment & Pension Rights (6th Revised edition)
Occupational Pensions (Subscription) Lexis Nexis
Pensions Law and Practice with Precedents (Subscription) Sweet & Maxwell
Sweet & Maxwell’s Law of Pension Schemes (Subscription)
The Guide for Pension Trustees World Economics Ltd
The Guide for Pension Trustees website, you can:
Tolley’s Pensions Law Looseleaf Service (Subscription)
Pensions Act, 1990
Pensions (Amendment) Act, 1996
Pensions (Amendment) Act, 2002
Pensions (Amendment) Act, 2006
Social Welfare and Pensions Act, 2005 (Part 3)
Social Welfare Reform and Pensions Act 2006
Social Welfare and Pensions Act 2007
Social Welfare and Pensions Act 2008
Social Welfare (Miscellaneous Provisions) Act 2008
Social Welfare and Pensions Act 2009
Social Welfare and Pensions (No. 2) Act 2009
Social Welfare (Miscellaneous Provisions) Act 2010
Social Welfare and Pensions Act 2010
Social Welfare and Pensions Act 2011
Social Welfare and Pensions Act 2012
Social Welfare and Pensions (Miscellaneous Provisions) Act 2013
Social Welfare and Pensions Act 2013
Social Welfare and Pensions (No. 2) Act 2013 49/2013
Social Welfare and Pensions Act 2014
Social Welfare and Pensions (No. 2) Act 2014 41/2014
Social Welfare (Miscellaneous Provisions) Act 2015 12/2015
Social Welfare and Pensions Act 2015 (Part 3)