Part 1 – Quick Refresher on Legal Duties

20 / 04 / 2020

In these exceptional times, how can trustees and employers best take legally watertight decisions? When life returns to normal, present decisions need to stand up to legal scrutiny if challenged.

Some top tips:

  1. Trustees

Don’t be afraid to take decisions (including a decision to take no action). Trust law has its roots in ancient legal cases but is infinitely adaptable.

The Courts have regularly developed trust law to meet new circumstances. The present coronavirus is just an extreme new circumstance.

Do obtain and consider advice. Even if the advice is caveated, the fact that trustees have obtained advice, duly considered it and kept adequate minutes will usually protect them.

If a trustee decision is challenged, remember the Court’s approach: trustees are appointed for a reason namely to take decisions; just because the Court might have reached a different decision does not mean the Court will upset the trustees’ decision and substitute the Court’s own view; the Court recognises that the trustees are in the driving seat and best placed to take decisions. Providing trustees have regard to relevant circumstances, disregard irrelevant circumstances and do not reach a decision that no trustee board could properly have done, the Court will back trustees.

Decisions should be taken bearing in mind the overall legal context; so, also obtain advice about whether your trust deed and rules contains relevant requirements and whether pension legislation and regulators’ views affect your decision.

Bear in mind also that in recent years the Courts have explored the duties trustees owe to members and to sponsoring employers. For instance, in the Merchant Navy decision about the meaning of “best interests of the members” and the Key Med decision last year on the nature of the duty owed by trustees to the employer. Please ask us if you are unclear about the Court’s approach.

  • Employers

Sound decision making and applying due process are essential.

Recent Court cases have explored the employer duty when employers take decisions affecting the pensions of their present and/or former employees.

The employer’s duties under the contract of employment and duty of good faith in the pensions context both need to be kept in mind. Not forgetting the statutory overlay such as the employer’s duty to consult affected employees about listed changes, and the employer’s duty to continue to comply with auto-enrolment requirements (see also Part 3 of this Pensions Compass issue, Continuation of Contributions).

We hope Trustees and Employers find the above top tips useful. Please ask us for guidance if you are unsure. The times are highly unstable and the more you can do things by the book with the support of our legal advice the better.