Rules should be changed to prevent pension trustees from exoneration clauses and repercussions again...
Rules should be changed to prevent pension trustees from exoneration clauses and repercussions against maladministration or other pension scheme errors, says the Pensions Ombudsman.
Speaking out in his annual report, the Pensions Ombudsman, David Laverick said he was very concerned that occupational pension fund members are forced to ask "Where is the justice in this system?" when errors and mistakes made by the scheme cost the members in benefits yet no action can be taken against individual trustees.
This is not the first time that Laverick has raised the issue, but he does now have a little more ground to work from as the Law Commission is currently consulting on whether exoneration clauses in contracts can be used.
" I do not feel comfortable about identifying maladministration, noting that injustice has been caused to one or more scheme members but then telling them that no remedy can effectively be provided for that injustice because those responsible have the benefit of a clause in the Trust Deed which absolves them for responsibility for their actions," says Laverick.
"I do not have an answer when those who have lost out ask "Where is the justice in this system?" It seems to me to be particularly wrong when the maladministration has been the fault of Trustees who are charging for their services, " he adds.
Laverick has used the publication the Ombudsman's annual report to respond to Law Commission proposals, suggesting that the widespread use of exoneration clauses is likely to lead to pension scheme members having even less protection.
"I am particularly concerned by the operation of exemption clauses to provide sweeping protection for professional trustees," continues Laverick.
"In my view a professional trustee ought to be accountable to the trust fund for the adverse consequences of any breach of trust and I am incline to favour precluding them from relying on an exemption clause."
However, there was an argument during stakeholder pensions consultation which suggested that placing responsibility for running schemes on individual trustees is likely to leave occupational pension schemes with a shortage of willing trustees prepared to keep the funds running smoothly.
As it stands, pension trustees do have some protection against individual legal action as schemes such as the Occupational Pensions Defence Union supplies trustees with a form on insurance policy against litigation and individual financial repercussions.
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