LONDON--(BUSINESS WIRE)--Growing concerns about the personal liabilities faced by pension fund trustees as a direct result of the need for greater knowledge and understanding of scheme law, funding and investment strategies, could deter individuals from becoming trustees in the future, warns insurer ACE European Group (ACE).
In a survey conducted at the recent National Association of Pension Funds (NAPF) conference, 30% of those questioned said they would now not take up a trustee role because of the potential liability exposure created by the Pensions Act 2004 Trustee Knowledge and Understanding requirements. Over 40% of respondents indicated that if they were considering trusteeship now, they would only do so if there was trustee liability insurance cover already in place.
Commenting on the responses Emma Watkins, Pension Trustee Liability Insurance specialist at ACE, said: “The survey, one year on from the publication of the ‘Trustee Knowledge and Understanding Code of Practice’, clearly shows that personal liability has become a growing concern amongst pension trustees. As a result, the availability of trustee liability insurance has become an important issue for individual trustees.”
Close to 60% of survey respondents felt the requirements would make it harder to recruit member-nominated trustees. ACE believes this will be of concern to employers given that at the end of October 2007 the ability to opt-out of member-nominated provisions, designed to ensure that at least one-third of trustees are nominated and selected by members, will come to an end1. Emma Watkins commented: “Although the onus and cost of providing relevant insurance cover is bound to fall on the sponsoring employers, the provision of cover should be seen as a useful recruitment tool in attracting new trustees.”
In line with calls from Brian Holden’s Trusteeship Report and other professions such as solicitors and actuaries, 35% of respondents felt liability insurance should be mandatory for trustees. A further 27% felt the regulator should be taking decisive action to educate trustees and employers on the type of cover and availability of liability cover so they could make an informed choice.
Emma Watkins said: “What we have seen over the last two years in our discussions with trustees is a real, measurable shift in attitudes to their personal exposure to potential litigation. ACE would welcome any action to better inform trustees of their liabilities.”
As part of this drive for greater trustee awareness, ACE will be hosting a series of breakfast seminars throughout the UK, in September to inform trustees about the risks they face, the protections available and actions they can take to mitigate those risks.
Notes to editors:
1The member-nominated provisions are set out in sections 241 to 243 of the Pensions Act 2004, which provide that arrangements must be put in place to ensure that at least one-third of trustees are nominated and selected by members, and came into force on 6 April 2006. However, for schemes currently operating a member-nominated trustee/director "opt-out" under the previous provisions of the Pensions Act 1995, the new requirements will not apply until the earlier of the expiry of the existing opt-out or 31 October 2007. From 2009, the Department for Work and Pensions proposes that schemes will have to have 50% member-nominated trustees/directors. Processes should have been developed in order to meet this requirement by the proposed deadlines.
Dates and locations for the ACE Pension Risk Seminars are as follows:
ACE European Group has established branch offices in 19 countries across Europe, Freedom of Services permission to provide insurance services to clients in 29 EEA countries and affiliates in Egypt, Bahrain, Pakistan and Russia.
Part of the ACE Group of Companies, ACE European Group comprises the operations of ACE Europe, ACE Global Markets and ACE Tempest Re Group. ACE Europe provides a range of tailored Property and Casualty, Accident and Health and Personal Lines solutions for a diverse range of clients. ACE Global Markets (AGM) is ACE’s specialty international business, underwriting through ACE’s Lloyd’s Syndicate 2488 and ACE European Group Limited. Specialty lines include excess and surplus lines business, Marine, Aviation, Energy and Political Risk as well as Property, Financial Lines and Accident and Health. Additional information on ACE European Group can be found at www.aceeuropeangroup.com.
The ACE Group of Companies is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the Standard & Poor’s 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acelimited.com.