UK - Trustees of defined contribution schemes risk legal action from members for failing to meet higher expectations of "professionalism", experts warn.
London School of Economics governor and former government adviser Ros Altmann claimed trustees had “not focused properly” on responsibilities outlined in the Pensions Bill and the Myners Report.
Altmann – speaking at a Society of Pension Consultants roundtable on pension scheme governance – said: “Investment decisions have not been well designed and annuity purchase decisions are not being optimally taken. This leaves trustees of DC plans open to the risk of legal action by members who claim their pension was not handled properly.”
Altmann warned that a single default option was unlikely to cater sufficiently for all members’ needs, and that DC trustees needed to pay more attention to annuity purchase.
“There is a risk that members could take action against them – for example, if the member was entitled to an impaired life annuity but the trustees bought a standard annuity.”
Law Debenture director Mark Ashworth agreed that trustees needed to demonstrate “care and diligence”.
He said: “DC members are not there to fend for themselves and trustees must consider what information members need in order to stand the best chance of making sensible decisions.
“With more and more members in DC, trustees must be up to speed with developments, and one way or another will be criticised if they are found to be left wanting.”
SPC secretary John Mortimer said expectations of “professionalism” did not mean trustees needed professional qualifications.
“The key thing will be to ensure that the trustee body itself includes people with appropriate professional skills or access to advice.”
The top stories this week were the High Court's decision to block the £12bn annuity transfer from Prudential to Rothesay Life, and a separate court ruling that 'raises the bar' for pension rectification exercises.
Guaranteed minimum pension (GMP) equalisation has soared to the top of pension schemes' to-do lists, with 58% stating it is a priority project, research from Equiniti has revealed.
Professional Pensions is holding its defined contribution (DC) conference on 4 September.