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Home > Relationships between the Trustees and Others

3.0 Introduction

This section outlines the relationship between the trustees and the principal employer who, along with any participating employers, are the primary parties to the trust. It covers:


duties of the Principal Employer


duties of the trustees [see also 5.0]


independence of the trustees’ role


potential conflicts of interest


the selection and appointment of member-nominated trustees/directors


action on appointment and resignation of trustees, and


training aids.


Side agreement

Whilst a formal relationship exists between the company and the trustees (through the scheme’s deed and rules), it is worth considering drawing up a written agreement (in hard copy or electronic format) between the company and trustees on the employer’s duties, covering service standards, the timetable for the provision of information and one that will leave no doubt about paying contributions across on time.

Selection of trustees

As far as possible, trustee boards should be a well balanced mix of members and management. The Pensions Regulator recommends including a professional trustee on the board, using detailed technical knowledge and experience of good practice in different schemes to bring valuable insight, impartiality and objectivity. 

Under the Pensions Act 1995, there was no initial obligation for member-nominated trustees to have to be selected. This was because the Act introduced a provision allowing for ‘alternate selection arrangements’ to be adopted. Under the Pensions Act 2004, effective 31 October 2007 employers ceased to be able to ‘opt out’ of having member-nominated trustees and the minimum number of one-third of member-nominated trustees/directors has been governed by a code of practice issued by the Pensions Regulator. [See 24.10.2(viii)] Also, legislation is in place to enable the government to increase, if it wishes, the minimum number of member-nominated trustees from one-third to one-half of all trustees (possibly disregarding independent trustees).

Potential for conflicts of interest

The Pensions Regulator has recognised that, by their nature, conflicts of interest may be difficult to manage and therefore have potential to pose a risk to good governance. It has issued proposed guidance based on five ‘high-level’ principles:


understanding the importance of conflicts of interest


conflicts of interest policy


identifying conflicts of interest


evaluation, management or avoidance of conflicts, and


managing adviser conflict.

The guidance specifically refers to potential conflicts experienced by trustees who also hold a senior position with the sponsoring employer.

Source: The Pensions Regulator
Conflicts of interest: Regulatory Guidance [see 3.4.9]

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