From 1 October 2007 the Companies Act 2006 introduces a new concept of the Qualifying Pension Scheme Indemnity Provision (QPSIP). A QPSIP will be relevant to directors of corporate trustees of occupational pension schemes where the corporate trustee is connected to or associated with the company giving the indemnity (usually the principal employer).
A QPSIP allows the company to indemnify the directors of the corporate trustee against any liabilities in relation to the pension scheme or the corporate trustee other than:
- Liabilities for criminal or regulatory fines or penalties; and
- The cost of defending criminal proceedings in which he is convicted.
This is a much wider indemnity than that permitted by the current Qualifying Third Party Indemnity Provision (QTPIP) as it allows for an indemnity against liabilities to the trustee company itself. The new provisions apply to any indemnity given on or after 1 October 2007 (both for new and existing directors). Existing QTPIPs remain valid unless and until they are replaced by a QPSIP. Our understanding is that wider indemnities which may have been given before October 2004 (and expressly protected under previous legislation) do remain valid but this is not expressly confirmed in the legislation.
We would suggest that all directors of corporate trustees (where that trustee is connected to the principal employer) should consider requesting that the employer puts in place a QPSIP for their benefit. This could be by way of an amendment to the trust deed or a separate deed of indemnity. Where a pre-October 2004 indemnity is already in place then the QPSIP should be given without prejudice to each director's right to rely on the earlier indemnity.
An employer indemnity is just one of a number of protections which are available to trustees. Other protections might include insurance, scheme indemnities and exoneration clauses under the trust deed. We would be pleased to provide further advice on putting in place a QPSIP or on trustee protection generally.