In a determination issued last week, the Pensions Ombudsman found that a trustee can be treated as having acted fairly, notwithstanding that she was subject to an obvious conflict of interests. In making that finding, the deciding factor was the fact that an independent trustee held office at the time that the trustees' decision was made.

The case related to the distribution of death benefits. The potential beneficiaries included the trustee in question (Mrs Ranger) and her ex-husband's new 'partner'. The trustees decided to pay part of the benefits to each of them. It was argued that, in those circumstances, the conflicted trustee should not have been allowed to act. The Ombudsman noted that there was a conflict, but determined that, because there was an independent trustee in office and it was party to the decision, the possibility of any unfairness on the part of Mrs Ranger had been removed. It should also be noted that the scheme rules allowed a conflicted trustee to continue to act.

The Ombudsman's decision highlights the role that independent trustees can play in dealing with situations where the other trustees' interests conflict with those that they have or owe when acting in a different capacity. That role has also been acknowledged by The Pensions Regulator, which has issued guidance for trustees and has highlighted the need for them to identify, monitor and manage conflicts of interest that arise or might arise in connection with their schemes.

While the Ombudsman's decision focused on matters of pension law, the Companies Act 2006 is also relevant. It requires company directors to avoid situations in which they have, or can have, interests (whether direct or indirect) that conflict or have the potential to conflict with the interests of the company of which they are a director. A director (who owes a duty to the company) sitting as a trustee (who owes a duty to the scheme beneficiaries) may be subject to such conflicts.

While the Act allows conflicted directors to continue to act (through amendment of articles of association and statutory procedures) and that may be sufficient, the value of having an independent trustee on a trustee board should not be underestimated.