The Pensions Regulator

Guidance for trustees

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Working with the employer

Trustees and employers each have a vital role to play in the proper running of their pension scheme.

You and the employer need to form and maintain a good working relationship. Regular consultation is important; in some cases the law requires employers to consult.

This section of the guidance provides information and advice on your relationship with the sponsoring employer:

• Keeping informed of the employer’s plans
• Information that trustees, employers and professional advisers must share
• Upholding the interests of scheme members
• Protection against dismissal or victimisation

Keeping informed of the employer’s plans

The cornerstone of a good working relationship between trustees and the sponsoring employer is clear and open communication.

As a trustee, you should put procedures in place to ensure that the employer keeps you informed about its financial position and of any plans that will change or impact upon the pension scheme.

For example, the employer should tell you about:

• future plans which are likely to significantly change the size of the workforce and the scheme membership, for example, mergers or redundancies;
• corporate restructuring that may affect the employer’s ability to support the pension scheme;
• proposed changes to the scheme rules;
• proposed changes to members’ benefits; and
• proposals to switch from a salary-related scheme to a money-purchase scheme, or vice versa.

Trustees should treat the information they receive from the employer as confidential, and they should not pass it on to anyone other than their appointed professional advisers. Entering into a confidentiality agreement with the employer is one way of ensuring that all parties understand the importance of confidentiality.

Information that trustees, employers and professional advisers must share

The law requires trustees, employers and professional advisers to share certain information. For instance:

• The employer (and any previous employer involved with the scheme), and any actuary or auditor working for the employer, must give you any information that:
  • you reasonably need as a trustee; or
  • you reasonably need for your professional advisers.
• If the employer deals with the administration of the scheme for you, the information that must be made available includes:
  • who administers the scheme; and
  • the terms on which they do it.
• The employer must tell you, within one month, if something happens which is likely to be of material significance to you or your professional advisers. ‘Material significance’ could include, for example:
  • a large group of new members joining as a result of the employer buying a new company;
  • a major redundancy programme involving members taking early retirement; or
  • a restructuring of the employer which may have a materially detrimental effect on the pension scheme.

Trustees should be aware that an event that has a materially detrimental effect on the pension scheme may be one for which the employer should consider seeking ‘clearance’ from the Pensions Regulator.

Clearance is the term used to describe the voluntary process of obtaining a statement from the regulator that gives assurance that we will not use our anti-avoidance powers in relation to an event. If you become aware of such an event and you know the employer is not seeking clearance you should consider informing the regulator.

Our cearance guidance tells you more.

Upholding the interests of scheme members

As a trustee, your must protect the interests of beneficiaries. In order to do this there may be occasions when you need to be assertive in your dealings with the employer.

This may be where the employer has the power to make changes to the scheme but needs your agreement, or in relation to discussions over the funding of the scheme. You must make sure that the employer does not influence your decision to the extent that you breach any of your duties.

Our guidance on scheme funding gives more information on negotiating with the employer,  Our Trustee toolkit gives helpful examples of negotiations with employers, especially in relation to scheme funding – particularly the module covering defined benefit schemes: recovery plans etc.

In addition our guidance on Inducement offers helps trustees understand their responsibilities where the employer offers scheme members a financial inducement to transfer out of a DB scheme or accept a reduction in benefit.

Protection for trustees against dismissal or victimisation

It is against the law for a trustee to be dismissed or detrimentally treated for carrying out your duties or using your powers properly. If you are, you have a right to complain to an employment tribunal. The Employment Rights Act 1996 provides this protection for trustees who work for the employer.

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