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Pensions Act 1995 (as amended by the Pensions Act 2004): When the Pensions Regulator can appoint an independent trustee

Pensions Act 1995: Pensions Regulator's Power of Appointment

If Section 22 of the Pensions Act 1995 applies and an Insolvency Practitioner is appointed to act in relation to a scheme, then, under Section 23 of the Pensions Act 1995, the Pensions Regulator may, by order, appoint as a trustee of the scheme a person who:

is an independent person in relation to the scheme; and
is registered in the register of trustees maintained by the Regulator. The register is published by the Regulator and must be provided to any person who asks for a copy.

Pensions Act 1995: Sections 22 and 23 apply if:

the answer to each of the following questions is "yes".

Does the Insolvency Practitioner fall within the definition of Section 388 of the Insolvency Act 1986? (i.e. a liquidator, a provisional liquidator, administrator, administrative receiver, supervisor of a Company Voluntary Arrangement, trustee in bankruptcy, interim receiver, supervisor of an Individual Voluntary Arrangement)
Is the company/individual the employer in relation to the scheme?
Is the scheme established as a trust?

Section 22 and 23 also apply if:

the scheme is in an "assessment period" for the purpose of being considered for acceptance in the Pension Protection Fund; or
the scheme is authorised by the Board of the Pension Protection Fund to continue as a closed scheme.

Pensions Act 1995: Regulator appointments to ongoing schemes

Under new provisions of the Pensions Act 1995, introduced by the Pensions Act 2004, with effect from 6 April 2005, trustees, the employer or any scheme member can apply to the Regulator for the appointment of an independent trustee under Section 7 of the Pensions Act 1995. If the Regulator considers an appointment is necessary to ensure that the trustees have the necessary knowledge and skill to administer the scheme properly, or to secure the proper use of scheme assets, it can then decide to appoint an independent trustee from its register.

"Independent"

To be an "Independent person" the independent trustee must satisfy all of the following conditions:

Have no interest in the assets of the employer or of the scheme otherwise than as a trustee of the scheme. Therefore, he will not be independent if he is a creditor of the employer or a member of the scheme. (Note: "Interest" is not defined). Also a shareholder will have an interest unless there is no hope of any dividend being paid.
Not be "connected" with or an "associate" of the employer or the Insolvency Practitioner or the Official Receiver. Therefore, the following will not be independent:- Companies in the same group (e.g. subsidiary companies acting as corporate trustees); employees, directors, shadow directors and officers of the employer and their relatives; associates of a director or shadow director of the employer (e.g. another company of which such a director is also a director); partners and employees of the IP; creditors and members (and persons connected and associated with them) of the scheme (on the basis that they have an interest in the assets of the scheme).
"Connected" has the same meaning as in Section 249 of the Insolvency Act 1986; i.e. a person is connected with a company if he is a director or shadow director of the company or an associate of such a director or shadow director or if he is an associate of the company; a person is not "independent" if he is connected with or an associate of a company which has an interest in the assets of the employer.
"Associate" is defined in Section 435 of the Insolvency Act 1986 and includes the husband, wife, civil partner or relative or the husband, wife or civil partner of a relative of the individual or of the individual's husband, wife or civil partner; a person with whom he is in partnership and the husband, wife, or civil partner or a relative of any individual with whom he is in partnership; any person who he employs or by whom he is employed. A company is an associate of another company if the same person has control of both or a person has control of one and persons who are his associates or he and the persons who are his associates have control of the other ("having control" means the directors of the company or of another company which has control of it are accustomed to act in accordance with his directions or instructions or he is entitled to exercise or control the exercise of one third or more of the voting power at any general meeting of the company or of another company which has control of it); if a group of two or more persons has control of each company and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating a member of either group as replaced by a person of whom he is an associate.

Trustee Register
In addition to being "an independent person", the following conditions must be satisfied before an independent trustee can be included on the register maintained by the Pensions Regulator:

When making an application to be registered or at any time while registered, the independent trustee must not be prohibited, suspended or disqualified from being a trustee by the Regulator.

The Regulator must be satisfied that the independent trustee (1) has sufficient relevant experience of occupational pension schemes, (2) is a fit and proper person to act as a trustee, (3) operates "sound" administrative and accounting procedures, and (4) has adequate indemnity insurance cover. ((1) and (2) apply additionally in the case of corporate trustees to every person who has "significant influence over the management of the pensions trustee work", or whose signature may authorise a transaction involving the scheme assets, and also to a person who has overall management responsibility for the pension trustee work).

The independent trustee must carry on business from a UK address.

The independent trustee must agree (1) to have his fees and costs scrutinised by an independent adjudicator and to be bound by his determination; (2) to disclosure of his name, area of work, and business address on the trustee register; (3) to comply with reasonable requests to provide information to the Regulator; and (4) to inform the Regulator if he becomes disqualified from acting as a trustee.

Other points to note:

No more than one trustee may at any time be a statutory independent trustee in relation to any one scheme.

Obligations cease to apply if: a new employer becomes the employer of persons to whom the scheme relates i.e. the insolvent employer ceases to be principal or associated employer in relation to the scheme; or the Insolvency Practitioner or the Official Receiver cease acting in relation to the employer (i.e. the winding-up of the employer is completed).

If the only trustee of the scheme prior to the independent trustee's appointment under Section 23 is the employer, then once the independent trustee has been appointed the employer automatically ceases to be a trustee (Section 25 (1)).

As long as Section 23 applies to a scheme and an independent trustee has been appointed, any discretionary power vested in the trustees or manager of the scheme can only be exercised by the independent trustee.

For as long as Section 23 applies and an independent trustee has been appointed, the independent trustee cannot be removed solely by virtue of any provision of the trust deed or rules of the scheme (Section 25 (3)).

An independent trustee who ceases to be "an independent person" must as soon as reasonably practicable give notice of the fact to the Regulator and he shall automatically cease to be a trustee unless that would leave no trustee of the scheme in which case he will remain a trustee until another independent trustee is appointed (Section 25 (4)).

The order made by the Regulator appointing the independent trustee may provide for the trustee's fees and expenses to be paid by either the employer, or out of the scheme's own resources.

Multi-Employer Schemes � The independent trustee provisions of the Pensions Act 1995 apply to schemes with more than one employer in the same manner as single employer schemes, so that the provisions apply identically to each employer to whom an Insolvency Practitioner is appointed to act.

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