Prohibition of trustees

A prohibition order is an order made by The Pensions Regulator, which has the effect of preventing a trustee from acting as a trustee of:

• a particular scheme;
• a class of schemes; or
• all pension schemes.

What is the effect of a prohibition order?

A trustee affected by a prohibition order will be notified by the regulator, and will be:

• placed on the register of prohibited trustees;
• removed from the trusteeship of all the schemes covered by the order; and
• removed from the register of independent trustees.

Where a trustee has applied for entry to the register of independent trustees, the application will be declined.

Where is this power set out?

This power is set out in Section 3 of the Pensions Act 1995, as amended by the Pensions Act 2004.

Who can be affected by a prohibition order?

Any trustee of a pension scheme can be affected by a prohibition order. Prohibition orders can apply to corporate trustees and trust corporations as well as to individual trustees, and can apply both to member-nominated trustees and to employer-appointed trustees.

What happens if a person who is prohibited acts as a trustee?

If any person or company who is prohibited from being a trustee continues or recommences to act as a trustee of any scheme from which they are prohibited (as defined in the prohibition order), they commit a criminal offence. On conviction they could be liable to a fine and/or a prison sentence, and would get a criminal record.

If The Pensions Regulator becomes aware of circumstances which could cause us to have concerns as to whether a trustee was a 'fit and proper person' to be a trustee of a pension scheme, we will consider the matter, and decide whether or not to issue a prohibition order.

Standards expected by the regulator

In coming to a decision, the regulator would consider information which raised concerns about the trustee's:

• honesty and integrity;
• competence and capability; and
• financial soundness.

General considerations

When considering these areas, the regulator will take into account matters such as:

• any attempt to deliberately deceive the regulator, or any other regulator;
• any misuse of trust funds;
• any breaches of trust law if these are significant, persistent or deliberate;
• if a trustee were to persistently or seriously overcharge its clients (see the guidance on charging fees for trustee services);
• if trustees persistently or seriously breach pensions legislation or associated regulations;
• convictions (other than those noted under section 29 of the Pensions Act 1995) so far as these are not spent under the Rehabilitation of Offenders Act 1974. These could involve convictions for violence or for drug or substance abuse, for example.

This is not meant to be a comprehensive list, but to provide guidance as to the areas likely to be taken into consideration by the regulator. One of the Pensions Regulator's statutory objectives under the Pensions Act 2004 is to protect the benefits of members of pension schemes, and the regulator will take such actions as are necessary to meet that objective.

Charging fees for trustee services

Trustees must have authorisation, either by the scheme trust deed or, if the trustee concerned is appointed by The Pensions Regulator, by order of the regulator, to charge fees for their services. If they do charge, the regulator would be concerned where the fees charged were not reasonable in relation to the work carried out, or where the work done was not actually necessary.

The regulator would also be concerned where there is an attempt to hide the real amount being charged by the trustee - for example, where the trustee employs a service company to do work and charge the scheme but conceals the fact that the company is owned by the trustee.

What standards of honesty and integrity does the regulator expect?

Trustees are placed in charge of large amounts of other people's money, and this often has to be invested for long periods of time. Trustees are therefore expected to act with complete honesty in regard to their trustee functions and always to keep in mind their duty to act in the best interests of the beneficiaries of the scheme.

Section 29 of the Pensions Act 1995 already ensures that:

• any trustee who has been involved in any criminal offence involving fraud or dishonesty;
• any company director who has been disqualified from being such a director; and
• any person who has been made bankrupt

are automatically disqualified from being a trustee. However, the regulator may take into account other matters which could affect their view of a trustee's honesty or integrity.

What standards of competence and capability does the regulator expect?

The Pensions Act 2004 contains provisions concerning the level of knowledge and understanding required of trustees. These requirements came into effect from April 2006, and apply to all trustees. Newly appointed trustees (other than corporate, professional or expert trustees) are given six months from their date of appointment to meet the requirements.

The Pensions Regulator has issued a code of practice on the subject of trustee knowledge and understanding.

Failure to meet appropriate standards of expertise

Trustees that repeatedly fall below the appropriate standards of knowledge and understanding required may be considered for prohibition, particularly if no attempt is made to remedy the situation.

Professional trustees - trustees who charge for their services as trustees rather than just reclaiming necessary expenses, or who hold themselves out to be experts in trustee matters - are expected to show a higher standard of expertise than lay trustees. Should such a trustee, or firm of trustees, consistently fall short of the standards that the regulator could reasonably expect from pensions professionals, they could be considered for prohibition.

Other factors affecting competence or capability

The regulator would obviously expect a trustee to be competent to manage their own affairs, and should it be drawn to the regulator's attention that, in the case of a particular individual trustee, this was no longer the case, due to absence, disease or infirmity, for example, we would have to consider their prohibition.

In such a case trustees may have powers under the trust documents to achieve this result. However, the regulator would consider prohibition if this was the only way of removing an absent or infirm trustee.

What standards of financial soundness does the regulator expect?

The Pensions Regulator will not generally make enquiries into the financial standing of trustees as long as they have not been declared bankrupt, which is a matter for disqualification under the Pensions Act 1995.

However, if it came to the regulator's notice that a trustee that was a company, while not insolvent, was in such a financial position that it could not afford indemnity insurance, or was otherwise in severe trading difficulties, then we might consider its prohibition.

When The Pensions Regulator becomes aware of a situation which could cause us to issue a prohibition order, we will consider whether the circumstances require an immediate response.

The process used to decide whether the regulator is going to make a prohibition order, or exercise any other power, is called a 'determination'.

The regulator has two different procedures for making a determination depending on the urgency of the case. These are:

• the standard procedure; and
• the special procedure.

Standard procedure for making a determination to issue a prohibition order

If The Pensions Regulator is considering making a determination to issue a prohibition order against trustees, we will follow the standard procedure to deal with the determination unless there are circumstances which mean that an immediate response is required.

We will serve a warning notice on the trustees concerned, and the possibility of suspension or prohibition will be mentioned in that notice. The notice will set out the reasons for which the regulator is considering this action and the legislation on which the action is based.

Special procedure for making a determination to issue a prohibition order

If there are circumstances in which The Pensions Regulator considers that we have to act immediately, such as the possibility of a threat to scheme funds, we have the power to suspend or prohibit a trustee immediately without issuing a warning notice.

If we do so, the decision will automatically be reviewed by the regulator without the trustees having to make a reference to The Pensions Regulator Tribunal.

This automatic review does not affect the trustee's right to make a reference to the tribunal.

 

If The Pensions Regulator is considering making a prohibition order, but we feel that, for example, we need further information, we can make a suspension order, which has the effect of temporarily suspending a trustee from acting as a trustee.

A suspension order can take the same form as a prohibition order in that the trustee can be suspended from:

• a particular scheme;
• a class of schemes; or
• all pension schemes.

A trustee can appeal against a prohibition order or a suspension order by making a reference to the Pensions Regulator Tribunal.

If there was no reference to the tribunal, or the tribunal rules against them and no more appeals can take place, the former trustees may in the future apply to the regulator for the prohibition order to be revoked. Such revocation may be granted for a specific scheme (such as one containing only the trustee's benefits) or for schemes in general.

Before the regulator decides to revoke a prohibition order, we would need to be satisfied that the issue which led to the order being made:

• had been resolved; or
• was not applicable in the circumstances which would apply to the revocation.

The register of prohibited trustees is a register which The Pensions Regulator must hold, listing all trustees that currently have prohibition orders made against them.

The summary of the register lists those people The Pensions Regulator has prohibited from acting as trustees under s33 of the Pensions Act 2004, because we do not consider they are 'fit and proper persons' to act as trustees of occupational pension schemes.

The summary is broken down into three lists:

• Those trustees who are prohibited in respect of all trust schemes
• Those trustees who are prohibited in respect of only one scheme
• Those trustees who are prohibited in respect of two or more schemes, but not in respect of all trust schemes

The full prohibition register is available for inspection at the regulator's offices during normal working hours.

Persons prohibited in respect of all trust schemes

Name	Date of birth
Robert Angus Hill	11 June 1950
Simon Christopher Ragg	7 June 1965
Nicholas John Halton	25 March 1960
Mr Graham Pitcher	3 April 1961
Mr Gary Cordell	15 May 1968
BDC Trustees Limited	n/a
GP Noble Trustees Limited	n/a
Mentor Pension Trustees Limited	n/a
Susan McKenzie Beaumont	24 December 1966
David John Foster	22 August 1970
John James Quarrell	27 October 1948
Quarters Trustees Limited	n/a
Mr John Smart	21 May 1960

Persons prohibited in respect of one trust scheme

Name	Date of birth
The list currently has no entries

Persons prohibited in respect of two or more schemes, but not in relation to all trust schemes

Name	Date of birth
The list currently has no entries

Please note:

This summary does not include the names of trustees who we have suspended from acting as a trustee of a particular pension scheme, class of scheme or schemes in general under s4 of the Pensions Act 1995 (as amended by s34 of the Pensions Act 2004).

Our predecessor, Opra, issued a summary of its register of disqualified trustees, which lists those trustees disqualified from acting as trustees under s29(3) or 29(4) of the Pensions Act 1995.