UK - Government efforts to boost the number of lay pension trustees will fail unless it removes the threat of "unlimited liabilities" facing them, lawyers claim.
The government has been trying to boost the number of lay trustees through member-nominated trustee legislation.
But Hammonds partner Francois Barker fears that Equitable Life’s decision to sue its former directors in a £3.1bn negligence lawsuit could damage the government’s recruitment drive.
He said the case would act as a “huge disincentive” to people becoming trustees because, like directors, they face unlimited liabilities if they fail to discharge their duties.
Barker pointed out, however, that unlike company directors, lay trustees – on the whole – do not get paid.
He said: “In terms of the disincentive effect, there’s no question about it. The government says it wants to encourage people to become trustees or non-executive directors because they add variety and colour.
“You can see the rationale for doing it, but if you’re saying to trustees that you don’t get paid and if something goes wrong you’re on the hook for an unlimited amount of money, that’s a mixed message.
“People will look at this and think: ‘This could happen to me in a different context’. The numbers are quite scary.”
Occupational Pensions Defence Union advisory committee chairman Alan Herbert agreed.
He said: “OPDU has seen substantial growth in its membership over the last year and people are becoming very conscious of it.
“Trustees are faced with difficult decisions with employers and making arrangements for revising the funding plans and things. Trustees need to be seen to be doing the right thing – it’s much easier for members to challenge them now.”
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