Pension trustees play a critical role in ensuring the smooth operation of pension schemes, yet there are many myths and misconceptions surrounding their responsibilities and impact. These myths can cause confusion among pension scheme members, employers, and even prospective trustees. In this post, we’ll debunk some of the most common pension trustee myths to help you better understand their role.
Myth 1: Trustees Control How Much Pension You’ll Receive
Many people mistakenly believe that trustees have direct control over the amount of money members will receive upon retirement. In reality, pension trustees are responsible for overseeing the management of the pension scheme and ensuring it complies with legal obligations, but they don’t decide individual benefits. The amount of pension members receive is determined by the scheme rules, contribution levels, investment performance, and other factors set out when the pension was established.
Debunked:
Trustees manage the scheme, but the formula for how much pension you receive is fixed by the scheme’s rules and contributions.
Myth 2: Being a Trustee is a Full-Time Job
It’s easy to assume that the role of a pension trustee requires a full-time commitment, especially given the complexities of managing a pension scheme. However, while trustees must stay informed and attend regular meetings, being a trustee is typically a part-time responsibility. Trustees can be laypersons or professionals, and their time commitment varies depending on the size and type of the scheme. Some trustees may spend only a few hours a month on trustee duties, while others may need to dedicate more time during busy periods.
Debunked:
Being a trustee is usually a part-time role, with varying time commitments depending on the scheme.
Myth 3: Only Financial Experts Can Be Trustees
While pension schemes deal with investments, funding, and compliance, you don’t have to be a financial expert to become a trustee. Many trustees come from diverse professional backgrounds, including HR, administration, or management. Trustees are supported by advisers, actuaries, and legal experts who help them make informed decisions. Moreover, trustees are encouraged to undertake relevant training and development to ensure they understand their responsibilities and can effectively contribute to the management of the scheme.
Debunked:
Pension trustees do not need to be financial experts; they have access to expert advisers and training to guide them.
Myth 4: Trustees Have Unlimited Liability
One of the most pervasive myths is that trustees have unlimited personal liability for the decisions they make on behalf of the scheme. While trustees do have a fiduciary duty and are held accountable for their decisions, this liability is not unlimited. As long as trustees act in good faith, comply with regulations, and follow the correct procedures, they are generally protected from personal liability. Many pension schemes also have insurance in place to cover trustees in the event of a legal challenge.
Debunked:
Trustees are not exposed to unlimited liability if they act in good faith and follow their duties responsibly.
Myth 5: Trustees Make All the Decisions on Their Own
Some people believe that trustees operate independently and make all decisions regarding the pension scheme without outside input. In reality, trustees work closely with professional advisers, fund managers, actuaries, and legal experts to ensure their decisions are well-informed. They may also collaborate with employers, unions, and scheme members to gain a broader perspective on the needs and preferences of the beneficiaries.
Debunked:
Trustees work in collaboration with a wide range of professionals and stakeholders when making decisions about the pension scheme.
Myth 6: Pension Trustees Can Change Scheme Rules
Another common misconception is that trustees have the power to change the rules of the pension scheme whenever they see fit. In fact, trustees must operate within the framework of the existing rules of the scheme, which are set out when the scheme is established. Trustees can make certain administrative decisions or changes, such as investment strategies or administrative policies, but major changes to the scheme’s structure or benefits require approval from other governing bodies or the sponsoring employer.
Debunked:
Trustees cannot unilaterally change the pension scheme rules; they must follow the rules established by the scheme.
Myth 7: Trustees Are Always Paid Professionals
While there are professional trustees who are paid for their services, many pension schemes are managed by volunteer trustees, especially in smaller schemes or occupational pensions. Volunteer trustees are often employees, retired employees, or even members of the pension scheme themselves. They are motivated by a desire to act in the best interests of their colleagues and the scheme’s beneficiaries. Professional trustees are typically appointed when a scheme requires more specialised knowledge or additional oversight.
Debunked:
Not all trustees are paid professionals; many trustees are volunteers who contribute their time and expertise.
Conclusion
The role of a pension trustee is critical but often misunderstood. By debunking these common myths, it’s easier to see that trustees are there to protect the interests of members, manage risks, and ensure the scheme complies with the law. Whether they are volunteers or professionals, trustees collaborate with experts and make decisions within a structured framework, with the ultimate goal of securing the financial futures of scheme members.
