Small schemes' trustees in conflict of interest

UK - Small pension funds' trustees boards will encounter conflicts of interest with their corporate sponsor, according to David Blackwood, group treasurer at paints producer ICI.

Blackwood is predicting smaller pension schemes will find it difficult to maintain independence from the corporate sponsor, usually the employer, without running into a possible a conflict of interest because pension fund trustees may on occasions also act as the finance director of the corporate sponsor.

"If you are big enough, the key is to ensure the board of trustees is run properly, but the smaller schemes do not have the luxury of independent trustees," Blackwood said at the pension plan financial risk 2007 conference in London yesterday.

David Adams, group treasurer of Arla Foods, also speaking at the conference argued: "When you manage corporate activity, there is a point when you may know something as a treasurer which you don't know as a trustee."

He emphasised the role of the consultant, adding: "You have to be aware of the potential conflicts before they come along."

David Swann, treasurer at British American Tobacco (BAT) and trustee of the BAT UK pension scheme, agreed conflict of interest is a difficult issue for pension schemes to manage.

However, he added: "The benefits of a trustee assigned by the corporate sponsor far outweigh the potential conflict of interest risks."

Jonathan Clarke, director of treasury at Hovis bread producer RHM until its acquisition by Premier Foods this year, also agreed, arguing the trustee should stand aside if conflict becomes an issue.

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