The Pensions Authority is a statutory body set up under the Pensions Act 1990. The Authority regulates occupational pension schemes, trust RACs and Personal Retirement Savings Accounts (PRSAs) in Ireland. As a trustee of an occupational pension scheme, also called a company pension scheme, you have duties and responsibilities under trust law, under other relevant legislation and under the Pensions Act, 1990.
A pension scheme is a type of trust and a company pension scheme is a good example of one. In its simplest form, a trust is an arrangement under which assets are held and looked after on behalf of others called beneficiaries.
A person who holds and looks after pension assets for the benefit of members and their dependants is called a trustee. Although assets are held in the name of the trustees, they do not belong to them. The conditions of the trust under which the pension scheme is set up are detailed in a legal document called the trust deed and rules. It sets out who can join the scheme, what the benefits are and what contributions are paid.
There are two basic types of company pension scheme:
- Defined benefit schemes retirement benefits are calculated to a specific formula that creates a set level of income. The amount paid is usually related to each member’s length of service and final salary.
- Defined contribution schemes retirement benefits paid to each member are not set. They depend on the amount of contributions paid in for that member and the investment earned on those contributions.
Trustees should know which type of scheme they have responsibility for as there are different requirements under the Pensions Act for each type of scheme.
- Administering the trust in accordance with trust law, all other law and the terms of the trust deed and rules.
- Acting in the best interests of beneficiaries.
- Acting fairly between beneficiaries.
- Acting prudently and diligently.
- Exercising care and utmost good faith in all trustee duties.
- Seeking professional advice as necessary.
- Supervising those to whom functions have been properly delegated.
- Not making personal profit from the trust
- Being aware of possible conflicts of interest.
A trustee who is negligent, does not act in good faith or breaks the rules of the trust can be sued by the beneficiaries. They can be held personally liable for the entire amount of any loss that has occurred.
Trustees must take great care to make sure that all information received in their capacity as trustees is treated in the strictest confidence and only used for the purposes for which it has been given.
A trustee does not have the power to negotiate or vary the terms and conditions of the scheme. Trustees can only do what is set out in the trust deed and rules. They cannot act as a representative of the employer or the members.
The Pensions Act states that a trustee cannot be someone who:
- Is an undischarged bankrupt (currently certified bankrupt.
- Has made an arrangement with creditors and has not fulfilled the obligations under that arrangement.
- Has been convicted of an offence involving fraud or dishonesty.
- Is restricted, under Section 150 of the Companies Act, from being involved in the formation or promotion of a company for a defined period of time.
The Pensions Act clearly sets out the duties and responsibilities of trustees. There is a high degree of overlap between trustees’ duties under the general principles of trust law and their duties as prescribed in the Pensions Act. Trustees responsibilities under the Pensions Act are as follows:
Every trustee must undertake trustee training in accordance with the Pensions Act. Trustees are required to receive training on:
- The Pensions Act, the regulations made under it and any other law that affects the operation of their scheme or trust RAC
- The duties and responsibilities of trustees generally.
- Trustees are required to receive training within six months of their appointment and at least every two years thereafter.
Registering the scheme
Trustees must register their scheme with the Pensions Authority and pay the annual fee. Schemes must register within one year of their start date. A pensions consultant, administrator or life assurance company doing the day-to-day running of the scheme will usually arrange for registration and payment of fees. However, it is the responsibility of the trustees to ensure that their scheme is registered, with the registration details updated at least once a year and the annual fee paid.
Ensuring that contributions are received
The trustees shall make sure, as far as is reasonable, that contributions payable by the employer and members are received. One way to do this is to agree with the employer procedures and dates for the payment of these pension contributions. The dates may be specified in the scheme rules or, for defined benefit schemes, in the actuary’s valuation report, and should be adhered to. If dates are not specified, contributions should generally be made monthly or quarterly.
Investing the funds
The trustees must ensure that the resources of the pension scheme are properly invested in line with investment regulations and the scheme’s trust deed and rules. Trustees usually delegate the actual investment to a professional investment manager. Nevertheless, the trustees are responsible for monitoring the conduct of the investment manager and the performance of the assets.
If a scheme has not appointed an investment manager, the trustees must show the Pensions Authority that they have appropriate qualifications and experience to assess and advise on investment options, and to make investment decisions.
Investing the contributions
Trustees are also required to invest the contributions within ten days of the latest date by which the employer should have paid them. Trustees should also make arrangements for the timely payment of benefits.
Seeing that records are kept
Trustees are obliged to make sure that appropriate membership records and financial data are kept. Typically, member records will include;
- The member’s name, gender & date of birth.
- The date of joining the company and the pension scheme.
- Marital status, details of dependants and other beneficiaries.
- Present and past annual salary details.
- All transfer values received and benefits granted.
- Member contributions and additional voluntary contributions (AVCs).
- Members may be active, deferred or pensioner members and accurate records should be held in every case.
- PPS numbers of all members.
- Ensuring proper financial records are kept that include the trustee bank account, all financial transactions and financial reports received from third parties.
- Checking that the funding standard is met.
- Ensuring the scheme complies with the minimum funding standard (MFS) as required by the Pensions Act.
- At least every three years, trustees of defined benefit schemes must provide an actuarial funding certificate (AFC) to the Pensions Authority.
Appoint a Registered administrator
Trustees of every scheme must appoint a registered administrator to provide various services to the scheme. The core administration functions are;
- The preparation of annual reports.
- The Preparation of annual benefit statements.
- The maintenance of sufficient and accurate records of members and their entitlements to discharge the above functions.
- The submission of Annual Scheme Information (ASI) to the Pensions Authority.
Giving out information
Trustees must make available certain documents and information about the scheme and its operation to members and other specified persons such as
- prospective members
- spouses of members
- other beneficiaries and authorised trade unions that represent members.
The general information they must allow to be given out includes:
- Details about the set up and rules of the scheme.
- Certain basic information about the scheme.
- Details of an individual’s benefit entitlements under the scheme.
- Actuarial valuations (in the case of a defined benefit scheme).
- Annual audited accounts (if required).
- Annual reports to be prepared.
- Ensure the information is given within the timescales specified in the legislation.
Apply equal pension treatment
According to the Pensions Act, which gives effect to EU law in this regard, trustees of company pension schemes, with certain exceptions, must see that their scheme complies with the principle of equal pension treatment.
Distributing the resources of the scheme on wind-up
Trustees of a pension scheme that is being wound up must use the assets of the scheme to settle its liabilities without undue delay. When a decision is taken to wind up the pension scheme, trustees must notify members, their trade unions and the Pensions Authority within 12 weeks of the decision. Trustees have a duty to make sure that members’ pension rights are secured and the wind-up is completed as soon as is practical. Members must also be informed in reasonable time of their benefit rights and options under the wind-up rules, including who will pay the benefits after wind-up, the address for enquiries and how any surplus or deficit in the pension fund has been dealt with.
Court proceedings may be taken against trustees for non-compliance with the Pensions Act. The Pensions Authority may bring a case to the District Court or, for more serious allegations, refer the matter to the Director of Public Prosecutions who may want to prosecute in a higher Court by way of a charge sheet. The consequences are as follows:
- On summary conviction (in the District Court), persons found guilty of an offence under the Act will get a fine not exceeding €5,000, imprisonment for up to one year or both.
- On indictment in a higher Court, persons convicted of a breach of the Act will get a fine not exceeding €25,000, imprisonment for up to two years or both.
‘On the Spot’ fines provide an alternative to prosecutions of certain offences under the Pensions Act. The Act allows the Pensions Authority to notify a person in writing about a specified summary offence, giving 21 days to remedy it and pay the appropriate fine. If the offence is remedied and the fine paid, the prosecution will not proceed.