Pensions update – Conflicts of interest

Employer representatives who are pension trustees may find themselves in a position of conflict due to the Pensions Act 2004, which will require them to agree funding strategies with the sponsoring employer. Prior to the Pensions Act 2004 there was a minimum-funding requirement for pension schemes, but now each scheme must have sufficient and appropriate assets to make provision for liabilities.

Trustees must agree a strategy with the sponsoring employer for funding pension commitments and deficits within a 15 month period from the date of their next valuation. This must then be set out in a Statement of Funding Principles, which is to be reviewed every three years.

But Jane Beverley, a senior technical consultant at Punter Southall, said: "A lot of senior employees are trustees of their pension scheme and could find themselves conflicted. They need to be thinking about whether they should continue to be trustees."

The scheme specific funding requirement was introduced in September, but the publication date for the regulations relating to the provision has been delayed to December 30. The Pensions Regulator has said that in the interim schemes should follow their normal valuation cycle.