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Home > Trustees’ Liabilities and Protections

6.0 Introduction

This section covers:


the types of offence committed with potential to cause liability and some of the things that can go wrong for schemes


types of indemnity, and


information about giving financial advice to members (or avoiding giving, as more likely to be the case).



Three main types of indemnity?

Through the trust deed

Most trust deeds contain an exoneration or indemnity clause that protects the trustees from errors or omissions committed, other than for dishonesty, deliberate acts or negligence.

The following provisions should be included within the ‘Protection of Trustees’ clause (or rule) in the scheme’s trust deed and rules as a minimum:

‘no trustee will incur liability:
 (a) for acting as a trustee 
 (b) for the exercise (or failure to exercise) of any power or discretion 
 (c) for the performance (or non-performance) of his/her duties as a trustee or 
 (d) for the acts or omissions either of co-trustees, the secretary to the trustees, agents, delegates or any advisers to the scheme 
 (e) for relying upon any advice or recommendations given by advisers
 (f) for any decisions, acts or omissions which were based on an incorrect understanding of the facts and circumstances relevant to the matter in question.

‘However, a trustee may be responsible, or chargeable, or liable, in respect of any act (or omission to act) which he/she knew to be a breach of trust and which he/she knowingly and wilfully committed (or omitted).’

Through the employer

The employer may also give indemnity to the trustees via the trust deed, to keep the trustees safe from financial harm against all actions, proceedings, costs, expenses, claims, demands and liabilities incurred in the execution (or professed execution) of the trust of the scheme and in the administration, management and winding up of the scheme except in respect of (i) any breach arising from own fraud or own deliberate disregard of the interest of the scheme’s beneficiaries or (ii) (in the case of a professional trustee) negligence.

Through insurance

Trustees may also wish to insure themselves collectively against claims made against them (but not against fines or penalties). Where the scheme rules allow, premiums for such cover can be paid from the fund, failing payment by the sponsoring employer.

To the extent that (a) the employer fails to indemnify the trustees and (b) the liability is not covered by insurance, the trustees should be indemnified out of the scheme’s assets (on the same footing as above, as if the employer was meeting the liability).


If you are a trustee or are about to become a trustee, check out the indemnity clauses under your own scheme, which you will find in your scheme Rules. Whilst you have the rules to hand, check out the clause or rule that covers how you may resign. The normal approach is that a trustee may resign (or retire) by giving written notice to the Principal Employer. The trustee will then cease to be a trustee on the expiry of such notice. If your rules should stipulate a minimum period of notice has to be given, this may not be too helpful. During any period of notice you will continue to be a trustee and you may want your notice period to be waived if your wish is to resign immediately. The alternative would be to change the offending rule.

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