UK – Alexander Forbes, the trustee firm at the centre of the Turner & Newall pensions battle, has come out and said there are inherent conflicts involved between plan sponsors and trustees.
“There is an inherent conflict, or potential conflict, between employers and trustees,” said Andy Bakewell, director at Alexander Forbes Trustee Services. Bakewell’s boss, managing director Tim Culverhouse, is at the sharp end of the T&N affair. Bakewell did not refer directly to T&N.
The underfunded scheme is at the centre of a takeover bid for T&N’s parent company Federal Mogul. Observers have speculated that the UK’s new Pension Protection Fund could be facing a huge financial hit if the trustees of the scheme decide on a delayed wind-up.
Speaking at a seminar, Bakewell explained that before the firm accepts a job it looks at four or five key areas. These include the scheme rules – which define who has the power. This is usually the employer, he said. The power to invest usually resides with the trustees - although the employer or sponsor will have an interest.
He told the seminar that Alexander Forbes has seen several examples recently where employers have not given trustees the information they need, on issues such as business trading or potential merger and acquisition activity.
“Trustees should obtain business plan and audited accounts,” Bakewell said, adding that they should also consider commissioning an independent solvency reports on the strength of the employer.
Bakewell also saw potential conflicts where senior executives, such as finance directors, were on trustee boards. A company could be looking for an active strategy to maximise market gains, while trustees should be looking at a passive strategy to fulfil their duty for security.
Independent pensions adviser Ros Altmann told the meeting that the government’s virtually last-minute hint that schemes in wind-up could be eligible for the Pension Protection Fund appeared “targeted at the T&N scheme”. She said it seemed the government had come under a lot of pressure from the unions. The decision left “bit of a bad taste I think”.
“I do have a big fear that this government will go down in history as the one that destroyed private pensions,” she added.