Two legal consequences followed the demise of Robert Maxwell and the discovery of his plunder of the Mirror Group Newspaper Pension Fund. First, there was a flurry of litigation (and threats of litigation) brought by the Mirror Pension Trustees against, amongst others, the pension fund managers and auditors in an attempt to replenish the depleted funds. The second consequence is the Pensions Bill which is at present working its way through Parliament. This represents a wide ranging reform of both the regulation of occupational pension schemes and the responsibilities of those who manage or advise them.

In general terms the Bill provides for:

a)      a minimum solvency requirement for occupational pension schemes;

b)      the rectification of any shortfall between the value of a scheme's assets 
        and the amount of a scheme's liabilities;

c)      the criteria which must be applied by the trustees of a scheme in exercising 
        their powers of investment. These criteria also apply to a fund manager to whom 
        the trustees have delegated any investment function.

A specific obligation is placed on a scheme actuary or auditor to "blow the whistle" to the new regulatory body (the Occupational Pensions Regulatory Authority) if they have reasonable cause to believe that any duty relevant to the administration of the scheme has not been complied with. Breach of this obligation can lead to the Authority imposing a civil penalty up to a prescribed amount which is apparently in addition to (and not in the place of) any other legal liability which may flow from the failure to notify.

The Bill also seeks to regulate the relationship between the pension trustees and a fund manager to whom decisions concerning the investment of the fund have been delegated. In addition to the fund manager being subject to the same specific investment criteria which apply to trustees in choosing suitable investments for the scheme, the Bill provides that: 

a)      The trustees have no liability for any act or default by the fund manager in investment 
        matters provided that the trustees took all reasonable steps to satisfy themselves that 
        the trust manager had the appropriate knowledge and experience for managing the 
        investments of the scheme and was carrying out their work competently.

b)      A fund manager cannot exclude or restrict their liability for breach of any legal 
        obligation to exercise reasonable skill and care in the performance of any investment 
        function.

The precise terms of the Bill are still being argued over but the basic provisions are clear. It will be necessary for pension trustees, auditors, actuaries and pension fund managers to study these proposals with care to ensure that their new roles are fully understood before the Act becomes law.

Keywords: Pension Fund Managers Actuaries and Auditors - New responsibilities under the proposed Pensions Act - Legal climate post- Maxwell - Professional Indemnity

The content of this article is intended to provide general information on the subject matter. It is therefore not a substitute for specialist advice.