Who runs pension schemes?

by Editor on August 12, 2013

The pensions system can seem labyrinthine, but with the government’s new auto-enrolment initiative affecting all UK employees, understanding the structure of the system has become more important than ever. While employees are contributing to their pension schemes, there are dozens of individuals working behind the scenes to ensure the process of saving for retirement runs as smoothly as possible…

Who is in charge?

Pension Trustees: Trustees and the trustee board are legally responsible for the proper running of a pension scheme in the name of its members. Trustees must work with the sponsor employer, forging and maintaining a good working relationship to protect and promote the needs and best interests of member beneficiaries. These can be non-professional (also known as “lay”) or professionals. For more information on independent trustees, see “How To Appont An Independent Trustee”.  The trustee role involves important duties towards the scheme and its assets, including:

  • deciding how the scheme should be funded
  • deciding how and where assets should be invested
  • understanding how pension payments should be made to members

Trustee duties extend to the day-to-day administrative tasks or ‘governance’ of the scheme. Providing effective governance, in the interests of beneficiaries, is a legal duty of the trustee – who may need to draw frequently from the expertise of appointed advisers…

Advisory positions

Trustees may be legally responsible for the governance of their pension scheme, but make decisions based on the advice of specially appointed individuals…

Investment Consultants: Pension trustees use investment consultants to determine the best strategy for enhancing their scheme’s assets. The array of strategies available for investing assets can be confusing – an investment consultant offers a professional service to help trustees meet their financial goals. Investment consultants are most effective when working towards long term objectives, actively monitoring client investments and adapting as circumstances change.

Communications Consultants: One of the trustee’s primary roles is to maintain clear communication with every member of the pension scheme. Most importantly, the trustee must be able to relate important developments to beneficiaries swiftly and effectively – and advise them in all matters regarding their scheme. A communications consultant helps develop communication strategies for trustees to use in their capacity as pension governors. Consultants may also advise on matters of external communication, including media relations, publicity and advertising campaigns.

Pension Actuaries:  Actuaries specifically manage risk variables and work to understand how certain investment strategies might strengthen or harm a client’s assets. Pension actuaries work with other parties involved in a scheme, including lawyers and administrators, to ensure the investment goals, ambitions and needs of trustees are met.

Administrative positions

The day-to-day administration of a scheme can be complicated – administrative staff are crucial to ensuring the smooth running of any pension plan…

Pension Administration Managers: While trustees are responsible for overall governance, pension administration managers work with specific fiduciary duties. All pensions must have at least one administrator – responsible for fiduciary requirements like registration with HM Revenue and Customs, ensuring their scheme meets its taxation requirements and payment of any tax charges.  Trustees may hold the administration manager position in addition to their governance role.

SIPP/SSAS Administrators: Self-Invested Personal Pensions and Small Self-Administered Scheme pensions are special types of retirement plan – requiring specific types of administrative expertise from their employees. SIPP plans allow individuals to make their own investment choices, while SSAS plans involve only a small group of members. The investment strategies and funding requirements of these types of pension plan differ from more conventional schemes – hence the administrative and governance needs of each are more specialised.

Group Risk Administrators: Certain pension schemes are supported by Group Risk plans – offering members financial protection in the event of critical illness or death. Group risk payments may be used to help rehabilitate staff back into the workplace or even as insurance against worst case scenarios. Group Risk administrators work with the demands of pension schemes, handling situations in which income protection payments are necessary to protect members’ pensions.

Pension Technicians: Assisting the administrative and advisory teams of a scheme, the Pensions Technician works to ensure policies are issued to members in accordance with the framework of complicated pensions law. Working in-house or in a freelance capacity, pension technicians  identify changes to the law which affect the management of their client pension scheme – implementing those changes where necessary and passing on guidance to trustees and other administrative staff.

Financial positions

Pensions are ultimately about delivering financial benefits to members, which means employees must be highly skilled and capable of handling complicated financial transactions…

Pension Payroll Officers: A vital part of any pension scheme, the Payroll Officer ensures pension cheques and pay advice slips are dispatched correctly and efficiently to members. Payroll officers also calculate benefits in the event of a pensioner’s death and apply any other modifications which may affect payments, such as changes in legislation. Payments to external organisations and third parties are also the responsibility of the payroll officer.

Pension Accountants/Financial Officers: Pension accounting is complicated – and accountants work with regulations concerning different types of pension plans (defined benefit, defined contribution) and their investment portfolios. Like any accounting position, pension accountants and financial officers monitor and report on the assets and finances of their scheme, co-ordinating audits, preparing budgets and reconciling the movement of money.

Legal positions

To ensure on-going compliance with evolving regulations, pension schemes must receive capable legal advice…

Pension Lawyers: the landscape of pensions law is constantly changing, pensions lawyers ensure those strict regulations are met by their scheme. In a professional capacity, pensions lawyers offer advice to trustees, managers and other members of the advisory and administrative staff – providing risk mitigation and ensuring compliance with pension law. In the event of disputes or problems between members of the pension trust, pensions lawyers are a valuable asset for resolving issues between members, trustees and sponsor employees.

Other roles…

Depending on the size of a pension scheme, there may be hundreds of important roles which affect its day to day management. Secretarial staff provide vital assistance to all members of a pension’s structure, while roles in Communications may extend to press and specialised media officers – reflecting the diversity of the modern, online world. Like the ever-changing regulatory landscape, a successful pension scheme must employ individuals who can adapt to meet the evolving needs of its members.


A controversial Supreme Court judgement has overturned a previous Court of Appeal decision which gave trustees a way to rectify significant errors made in their governance of a trust. The Hastings-Bass rule had previously protected trustees from mistakes – like paying a pension to the wrong person or avoiding unforeseen tax liabilities. Hastings-Bass attracted criticism in the past – seen by many as a way for trustees to avoid the consequences of incorrect decisions or a failure to follow their fiduciary duties.

The Supreme Court judgement has been criticised by some observers who predict it will lead to lawsuits from pension schemes against their advisers. The decision follows two key cases, Futter vs Futter and Pitt vs Holt, both of which clarified details regarding the legal penalties of trustees acting in breach of trust.

Reaction to the judgment has been mixed, with some voices claiming lawsuits, from pension schemes against those providing advice, will now rise. Others however, say the new verdict could actually help aid rectification of certain types of error and have called into question scheme trustees’ reliance on the Hastings-Bass rule. Eversheds partner, Giles Orton, supported the decision, especially in the context of an incorrectly paid pension:

“In those sorts of cases, where it is clear something has been given away by mistake, the Pitt part of this judgment is helpful,” said Orton, adding that the “get out of jail free card” provided by Hastings-Bass has been removed.

A large part of the Hastings-Bass decision concerns situations in which trustees are considered to be in breach of their trust agreement. More specifically, in situations where advice is followed that later turns out to be incorrect, trustees would now only be deemed to be in breach when clear failure of fiduciary duty has occurred or an impasse has been reached after honest and reasonable discussion.

Commenting on the Supreme Court decision, Rosalind Connor, partner at Taylor Wessing, detailed the new legal consequences of taking advice which turns out to be incorrect:

“The trustees are not acting in breach of trust if they follow advice that turns out to be wrong,” said Connor. “The member may want to look at ways in which they could sue the adviser directly themselves, and that is always a possibility, but it’s a harder claim to bring.”

In the wake of the ruling, industry experts reassured trustees who are worried about their legal options. Despite the anxiety, the Hastings-Bass rule has not been applied widely in pension disputes where trustees have taken action to redress mistakes, said Macfarlanes partner, Camilla Berry:

“In the pensions area, we have been dealing with mistakes in documents for quite a while,” Berry said. “I don’t think many have actually been relying on the Hastings-Bass doctrine to reverse things.”

Berry points out , instead of falling back onto Hastings-Bass, schemes and lawyers involved in these situations have been relying on the legal procedure of ‘rectification’. Barry feels the repeal of Hastings-Bass is not going to change the landscape of pension governance:

“I am not sure it is really going to change a lot of things,” she said, “but it may be some people are sitting on big mistakes I don’t know about.”


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