Pensions Authority compliance alert: managing conflicts of interest
Friday 8 June 2018: Trustees of occupational pension schemes are obliged to administer the scheme in accordance with the terms of the trust deed and rules. This requires trustees to make decisions that are prudent, in members’ best interest and, where necessary, based on appropriate legal, technical or other professional advice.
As part of the decision-making process, trustees should also be mindful of potential conflicts of interest which could affect key decisions made by the trustee board. The Authority is recommending some practical actions that can assist trustees with managing conflicts of interest.
Identification of conflicts of interest
Effective trustee meetings are integral to ensuring there is a robust process for trustee decision-making. Well-run trustee meetings provide an opportunity for trustees to discuss key issues in-depth and to constructively challenge the views of their fellow trustees and advisors.
As conflicts of interest manifest themselves in various guises in occupational pension schemes, the Authority recommends that conflicts of interest are a standard item on the agenda of trustee meetings and that trustees and advisors are made aware of the obligation to declare any potential conflict of interest in relation to a particular issue being discussed.
Where a conflict is identified, the chairperson should ensure that the discussion and decision in relation to the conflict are properly minuted. Trustees should create and maintain a register of conflicts where any actual, potential or perceived conflicts are recorded. The Authority recommends that each trustee signs an annual return confirming that their information contained on the register is correct.
Conflicts of interest policy
The Authority recommends that a conflicts of interest policy, which aligns with the terms of the trust deed and rules should be adopted by the trustees. The policy should anticipate the kinds of conflicts that may arise and proactively set out how such conflicts should be managed. Depending on the seriousness of the conflict, the policy should address the circumstances or scenarios in which:
- The conflict can be declared and recorded on the conflicts register, but no further action is required;
- The conflicted trustee is restricted from voting, but allowed to participate in the related discussion;
- The conflicted trustee is required to leave the meeting during the related discussion;
- A sub-committee of the trustees, excluding the conflicted trustee, is established to deal with the conflicted matter; and
- The conflicted trustee is required to resign.
The policy should also address how trustees can manage any actual, potential or perceived conflict in relation to advisers if, for example, an adviser to the trustees is also acting for an employer or for another party that the trustees are dealing with.
Related guidance
The Authority has published a code of governance for DC schemes in relation to “Conflicts of interest” here.
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For further information, contact:
Technical Unit
The Pensions Authority
Tel: 01 613 1900
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Note to Editors
The Pensions Authority is the statutory body established by the Pensions Act to regulate occupational pension schemes, trust based RACs and Personal Retirement Savings Accounts and to advise the Minister for Employment Affairs and Social Protection on overall pension policy development. See www.pensionsauthority.ie