Trustees need to understand the different protections available to them, says Alasdair Blackshaw, an associate at Sackers

We all know that complaints and disputes arise from time to time but what protections are available to trustees when dealing with these circumstances and how might they be used?

How much coverage do i need

Complaints arise in all contexts – whether DB, DC, closed schemes or open schemes and even those schemes which have bought-out their benefits.

However the approach that trustees can take and the protections available in dealing with them can vary significantly.

Here are some typical examples:

  • In DB schemes, trustees might need to address a mistake that has occurred when calculating a member’s benefits.
  • For DC, a delayed transfer might result in a member complaining that they were prevented from investing their fund in a rising market and this caused them to suffer a loss.
  • In any arrangement, trustees could face a claim about their decision-making.
  • Trustees might even find themselves in need of protection in a situation they feel is not their fault – i.e. where the administrator has made an error and the member directs their complaint to the trustees as well.

What can trustees do in these situations and what might their defences and protections look like? Do these protections come from the scheme rules or are they provided through specific forms of insurance? What if a number of protections are potentially available – which would be the best option to use?

The answer to these questions is that both the scheme rules (in the form of exoneration and indemnity provisions) and insurance policies provide potential avenues of defence for trustees against complaints brought by individual members and in the context of more general litigation.

However, this is not always the case and trustees therefore need to understand and carefully consider which of these protections may be available to them and whether any other factors make the use of one or the other more appropriate in the given context.

For example, the trustee’s professional or lay status may have an impact, as will the value of any claim. The terms of any insurance policy will dictate whether it can be called upon, and then there are broader issues such as whether trustees are comfortable relying on these defences at all.

These are complex issues but ones that all trustees should consider in case they end up facing a claim or dealing with complaints.

Alasdair Blackshaw is an associate at Sackers