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Pension Ombudsman decision highlights trustee liability following breach of trust

In this article we review a recent determination by the Deputy Pensions Ombudsman, ordering the trustees of a scheme to reimburse over £190k due to a breach of trust.

The Deputy Pension Ombudsman’s recent determination in the case of Bridge Trustees Limited (PO-763) provides a firm reminder to Trustees of the limited protection afforded by indemnity clauses.

The complaint was brought by the newly appointed independent Trustee Bridge Trustees Limited, against the Scheme’s previous Trustees, after it was discovered that £193,010.93 of excess employer contributions were authorised to be refunded from the Scheme’s general reserve, to the financially struggling sponsoring employer.

The Deputy Pension Ombudsman in her determination concluded that two of the lay Trustees, namely Mr Burrows and Mr Lloyd (both of whom were employed by the sponsoring employer), had acted in a way that was a “conscious wrongdoing” and a “deliberate disregard of the interest of the members” and found that their behaviour had been “influenced by the financial position at the company”. It was also concluded that both Trustees had failed in their most basic obligation to check whether the payment was possible under the Scheme’s Trust Deed and Rules; that they acted without obtaining any legal or tax advice regarding the consequences of their action; and were in breach of trust. 

The trustees claimed that they were entitled to the protection under the indemnity provisions in the Scheme’s rules. However, the Deputy Pension Ombudsman concluded that as Mr Burrows and Mr Lloyd had acted in such a way that they could not be shielded by the Scheme’s indemnity protection. Both were directed to reimburse the Scheme to the amount of £193,010.93 together with interest and held responsible for meeting any tax charges that may arise.

If you have any questions or would like more information, please contact one of our pensions specialists below.

Author: Tony Holloran

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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Tim Green

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