The current economic recession is placing an increasing strain on the role of member nominated trustees (MNTs) to pension schemes, where the risk of placing interests as employees or union representatives above duty of care towards existing pension fund beneficiaries is growing, warns Trustee GAAPS.

Trustee GAAPS defines the problem as being caused by the number of negotiations over redundancy plans and pay freezes that juxtapose those over the recovery plans for pension schemes that are in deficit.

Trustee GAAPS say there is now a large implicit pressure on MNTS, who make up a third of pension fund trustees, to withdraw on discussions over pension contributions, as this may help reduce redundancies or secure more generous pay settlements. Whilst this is likely to benefit existing employees, it would disadvantage pension scheme members who have either retired or moved to another employer.

David Johnson, consulting director at Trustee GAAPS, explained: "It is inevitable that the sponsoring company will hold out the prospect of job losses or wage freezes so as to win concessions on their pension fund contributions."

Trustee GAAPS says that MNTs concerning breach of duty should give more control over fund deficit discussions to independent trustees if there scheme has one.

Johnson added that although MNTs are legally bound to make up a third of pensions committees, simply removing them will "only see companies fall short of quotas they must meet." His suggested solution would be an experienced independent trustee to oversee MNTs and "manage away the problems raised by conflicts of interest".

- Pensions Age June 2009

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