The Pensions Regulator

Guidance for trustees

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Your liability

Trustee boards work effectively by:

• following the requirements – and keeping within the restrictions – of the law and their scheme documents; and
• taking regular advice from their advisers before making decisions about changing circumstances and more complicated issues.

If something goes wrong, trustees may be personally liable for any loss caused to the scheme as a result of a breach of trust.

This section of the guidance explains the following:

• What is a breach of trust?
• Your liability as a trustee
• Protection from personal liability

See also, the Trustee toolkit module covering The Trustees' role.

What is a breach of trust?

A breach of trust can happen when:

• you carry out an act as a trustee which you are not authorised to do under the trust deed and rules (unless agreed by the court or directed by the Pensions Regulator);
• you fail to do something which you should have done under the trust deed and rules; or
• you do not perform one or more of the duties that you have under trust law or pensions law or do not perform them with sufficient care.

The breach of trust may be unintentional (for example, because of an administrative error), or it may be caused by negligence or through fraudulent and dishonest behaviour.

Your liability as a trustee

You could be personally liable for any loss which you cause to the scheme as a result of a breach of trust.

Even if you stop being a trustee, you are still liable for the decisions you took when you were a trustee.

The Pensions Regulator can take action with regards trustees who commit breaches of trust or against those who have breached pensions law. For example, we may order a trustee to put right a breach of pensions law and in more extreme cases fine them and/or remove them from their trusteeship.

Joint and several liability

You and your fellow trustees have 'joint and several liability'. This means you can be held responsible for a breach of trust committed by another trustee. That is why clear communication and regular trustee meetings are important to keep abreast of developments of the scheme.

Breaches of trust that occurred before your appointment

If you become aware of a breach of trust committed before you became a trustee of the scheme, you cannot just ignore it. If you take no action to correct the breach, you may be held liable for it even though it happened before you were appointed.

The code of practice Reporting breaches of the law tells you more.

See also the Trustee toolkit module on The Trustees' role.

Protection from personal liability

The rules of your pension scheme might protect you from personal liability for a loss caused by breach of trust, except where it is due to your own actual fraud.  You should seek legal advice as to what your scheme rules say about this. 

Using scheme assets

If the Pensions Regulator or a court fines you as a result of a breach, you can neither pay the fine out of the scheme's assets nor use the scheme's assets to pay the premiums for a policy insuring you against fines.

Indemnities and insurance

It may be possible to obtain indemnity from the employer or insurance to cover you in case of a breach of trust. You should seek advice about either and who should or may pay for it.

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