The Pensions Regulator consults on a definition of 'professional trustee' as we face an increasing drive towards '21st century trusteeship'.

Comment

The definition of professional trustee is not clear. For several reasons it is important to know when a trustee steps over the threshold to become a professional trustee. The consultation from tPR ,although recognising the problem and providing some helpful guidelines does not really come down with any hard and fast definition which takes us much further than the current ambiguity. It appears that we will still need to look on a case by case basis.

Introduction

It may come as a surprise but, as lawyers, we thrive on clarity of language. A neatly turned phrase can provide 100% job satisfaction. So hearing that the recent Pensions Regulator (tPR) is consulting on a revised description for the term 'professional trustee' was enough to bring on knowing smiles at the recognition at the highest level of the existing ambiguity in the phrase. The problem is there is no statutory or regulatory definition so we adopt the 'we know one when we see one' approach. A professional trustee is usually someone who holds themselves out as being an expert in the pensions field and who is paid for their services. But this masks a range of alternatives and the lack of clarity is not helpful.

On several levels it is important to know whether a person is a professional trustee. Most pertinently at the moment, tPR is also consulting on a monetary penalties policy (Article: Moving closer towards 21st century pensions trusteeship) which would result in tougher enforcement action (i.e. higher fines) being taken against professional trustees for failure to comply with pensions legislation / regulatory requirements on the basis that they are expected to provide a higher standard of care than lay trustees.

tPR approach

However, tPR recognises the chimera in the room and has not come out in favour of a specific definition. It has, however, shared some thoughts on how the definition may work.

  • TPR's view is that remuneration alone does not necessarily mean that someone becomes a "professional trustee". It is recognised that there is an increasing trend for trustees to receive some kind of financial compensation above expenses. It is argued that using the remuneration test as a sole indicator of professional trusteeship may, potentially, discourage people from being trustees.
  • Of more importance is to decide whether the trustee is acting in the course of the business of being a trustee. This will all depend on the facts of the case. The important part here is whether the trustee holds themselves out as being an expert in a range of trustee matters generally rather than just in a specific area.
  • Trustees who are remunerated and who are or have been members of the scheme or employed by a participating employer and who do not act as a trustee in relation to any unrelated scheme(s) are unlikely to be regarded as professional trustees.
  • The terms independent trustee and professional trustee are often used interchangeably and this is not helpful. The concept of "independence" does not feature significantly in the draft consultation.
  • To try and get some certainty, the consultation focuses closely on the precise meaning of terms such as 'expert' and 'trustee matters generally'.

Ultimately, although tPR is trying to provide clarity, it doesn't really take us much further than the current position. The consultation closes on the 9 May and as ever, we will wait to see how this progresses but as things stand we may still have to resort to knowing one when we see one.