Two trustees in the UK were held to be personally liable for payments totalling almost £200,000 made in breach of trust and were not protected by the exoneration and indemnity provisions contained in the scheme trust deed and rules, in a ruling by the UK Deputy Pensions Ombudsman (Pilkington’s Tiles Pension Scheme (PO – 763), 31 March 2015).


Two trustees of the Pilkington’s Tiles Pension Scheme, Mr Burrows and Mr Lloyd, authorised the return of £193,010.93 of excess employer contributions to the sponsoring employer.  The scheme had both defined benefit (DB) and defined contribution (DC) sections and the excess employer contributions arose under the DC section as a result of members leaving the scheme and taking a refund of their own contributions before their benefits had vested.

The scheme rules provided that excess employer DC contributions should be held in a general reserve and “applied by the trustees as the Principal Employer shall from time to time direct to pay the costs and expenses of the scheme and/or to reduce the amount of contributions which would otherwise be required from the employers”.

It was originally understood that the excess DC contributions amounted to approximately £30,000.  At a meeting between the four scheme trustees (Mr Burrows and Mr Lloyd, both of whom were directors of the company, and the two member-nominated trustees, Mrs Hirst and Mr Gratrix) and the financial director of the company, it was agreed that that the excess DC contribution “should be pooled with the DB section and considered an additional contribution”. 

Mr Harper of Capita (the administrators of the scheme) subsequently told Mr Burrows and Mr Lloyd that the excess DC contributions were in fact valued at £198,647.50 and arranged for same (less Capita’s fees) to be transferred to the trustees’ bank account.  On the same day, Mr Burrows and Mr Lloyd authorised payment of £187,191.25 to the company’s bank account.  Within the following three months, Mr Burrows and Mr Lloyd also authorised the transfer of a further £5,819.68 to the company relating to excess contributions.  While Mr Burrows and Mr Lloyd were certain that the return of excess contribution had been informally discussed with the other trustees, Mrs Hirst and Mr Gratrix stated that they had no knowledge of such discussions.  Furthermore, there were no references to the repayments in the minutes of the trustees’ meetings.

Mr Burrows and Mr Lloyd’s position

Mr Burrows and Mr Lloyd admitted that they had authorised the return of excess DC contributions of £193,010.93 and that this was done without the involvement or agreement of their fellow trustees.  However, they argued that the repayments were made in the firm belief that they had no alternative, having been advised by Mr Harper of Capita that this excess must be returned to the employer.  Mr Harper denied giving any such advice.

Mr Burrows and Mr Lloyd further contended that even if they were found to have acted in breach of trust, they were entitled to the protection of the indemnity and exoneration provisions under the scheme.  The relevant rule provided that the trustees were entitled to be indemnified and not liable for any breach of trust except in cases of “fraud or deliberate disregard of the interests of the beneficiaries under the fund”.  Mr Burrows and Mr Lloyd argued that these provisions would relieve them of all personal liability in the absence of evidence, proven to a very high standard of probability, that they acted fraudulently or in deliberate (ie conscious and intentional) disregard of the members’ interests.

Pensions Ombudsman’s findings

The Pensions Ombudsman found that, on the balance of probabilities, Mr Harper would not have advised Mr Burrows and Mr Lloyd to repay the excess employer contributions to the company.  She noted that, in any event, the trustees could not be excused by simply relying on such advice and noted that they should have considered the reasonableness of any advice received and challenged same where necessary.  The Pensions Ombudsman further observed that Mr Burrows and Mr Lloyd should have considered taking legal and tax advice, which they did not.

The Pensions Ombudsman also found that, on the balance of probabilities, Mrs Hirst and Mr Gratrix were not informed of the return of contributions.  She was also of the opinion that Mr Burrows and Mr Lloyd had not acted reasonably in making the payment to the company without conferring with their fellow trustees, meeting to reconsider the alternatives after they found out that the excess contributions greatly exceeded the original estimated value of £30,000, taking legal or tax advice or considering if the repayment would be permitted by the of the scheme rules.  She further noted that neither Mr Burrows nor Mr Lloyd had considered if they had a conflict of interest when authorising the payments to the company.  The Pensions Ombudsman concluded that Mr Burrows and Mr Lloyd had acted in breach of trust by authorising the payments to the company in contravention of the scheme rules. 

The Pensions Ombudsman further noted that while there was no evidence of Mr Burrows or Mr Lloyd gaining personally by the repayment of excess contributions, this refund was certainly of help to the company at a time when it was experiencing difficulties.  She concluded that Mr Burrows and Mr Lloyd were more interested in helping the company than protecting the beneficiaries and therefore found that they had acted in deliberate disregard of the interests of the members and were not entitled to an indemnity under the rules of the scheme.  The Pensions Ombudsman directed Mr Burrows and Mr Lloyd to reimburse the scheme for the total excess DC contributions transferred to the Company (plus interest, tax changes and late payment charges).


While this is a determination of the UK Pensions Ombudsman, trustees in Ireland can take note of many important lessons from this ruling.  In particular, the determination highlights the potential conflicts of interest that can arise for trustees and the personal liability which they can face if such conflicts are not managed effectively.  It also illustrates how important it is for trustees to act in the best interest of scheme members, to be aware of the provisions of the governing scheme documentation and to take legal and tax advice where necessary.