Here is a question for trustees to think about: Who are the members and beneficiaries of my pension scheme?

Although the answer may appear an easy one, the reality is that identifying all the beneficiaries can be far from straightforward and the implications of failing to do so can be expensive. A recent case confirms that placing section 27 notices advertising for claims will not protect the trustees from liability to members it once knew about but had subsequently forgotten. The case is a useful reminder about accurate record keeping.

Background

MCP Pension Trustees Limited sued Aon Pension Trustees Limited for breach of contract or negligence for failing to properly maintain scheme records.

Between 1988 and January 1996, 32 people had transferred from the D&R scheme into the Maxwell Communications Works Pension Scheme (works scheme). They were, however, wrongly recorded as members of a different scheme. The trustee bought out benefits for works scheme members between 1997 and 2003. The 32 transferee members were omitted from this exercise, because the trustee had genuinely forgotten about them.

The trustee placed notices in accordance with section 27 of the Trustee Act 1925 during the wind-up of the works scheme. None of the 32 transferees responded. The trustee sought to rely upon the protection provided by section 27 and claimed that it was not responsible for the transferees who had not replied as it did not have notice of their claims.

Judgment

The Court of Appeal considered a preliminary issue: “whether, on the true construction of section 27 Trustee Act 1925, the claimant is not liable to the D&R works transferees”.

Elias LJ stated that the trustee did have notice of the interests of the D&R transferees. It was immaterial that the trustee had forgotten about them. Knowledge and notice are different concepts and it is impossible to say that notice lapses with memory.

The judge was not asked to consider whether the trustee ought to be excused liability under section 61 Trustee Act 1925 on the basis that it had acted honestly and reasonably. He stressed that section 61 did not in itself cancel the liability.

The case was remitted for trial, where section 61 may become a key issue.

Comment: the Importance of Accurate Data

Several key points arise from this judgment.

First, Elias LJ confirmed that section 27 does extend to pension schemes.

Second, it is not possible for trustees to avoid liability to members, of whom they have notice, simply by placing statutory notices. Trustees will almost certainly have some notice of their scheme’s members, no matter how old the notice, and that notice will override the protection of section 27.

Third, although statutory notices will not protect against claims by members, it is possible that they will help to protect trustees against claims by dependants, or potential dependants, of which trustees do not have notice. However, it is important to consider the definition of notice, helpfully referred to in the judgment, which can be constructive as well as actual.

Fourth, it remains to be decided whether the placing of statutory notices will assist trustees in claiming relief under section 61, on the basis that they have acted honestly and reasonably. This issue may be decided in the subsequent hearing.

Finally, this case is a useful reminder of the need for accurate data! There is a significant body of law that requires good records to be kept. This applies variously to trustees, managers and providers of pension schemes.

Recently, TPR has focused on raising standards of administration in pension schemes. Some key themes include:

  • Good quality scheme records are critical to many of the activities that need to take place during the life of a scheme, and inaccurate or deficient records will have a harmful impact on members’ benefits.
  • Trustees are accountable for scheme records. However, administration providers, auditors and other service providers have a vital role to play supporting their clients in meeting their duties to members.