Doubts raised over moves to give employees greater pension power

RECENT legislation has paved the way for employees to be given more power over their pensions, but workers should beware the potential pitfalls.

Secretary of State for work and pensions, Alan Johnson, told the TUC in September that the government would create powers to ensure more pension scheme trustees were nominated by members of the fund.

The Pensions Act 2004, recently given Royal Assent, handed Johnson the authority to realise his wish that the proportion of member nominated trustees be increased to a half from a third.

Designed to ensure trustees act for the benefit of pensioners, as opposed to the corporate interest, joint representation sounded good in theory. But there are hazards in store for would-be member nominated trustees, a pensions specialist has warned.

David Trenner, at Glasgow-based retirement planning specialist Intelligent Pensions, said nobody with an understanding of the rules governing occupational pension schemes would seek to become a member nominated trustee.

The reason? The act calls for trustees to be better trained. They need to understand the rules of the scheme and relevant legislation - one piece of which stipulates that trustees can be held personally liable for scheme shortfalls.

Trenner cited the recent wind-up of the pension fund of Edinburgh-based engineering consultant Blyth & Blyth, which raked up a huge deficit and forced the firm into receivership two years ago.

An independent trustee appointed by the Occupational Pensions Regulatory Authority to wind up the scheme has issued proceedings against its predecessors - a "bombshell" for trustees of pension funds across the UK, said Trenner.

"The independent trustee argues the previous trustees should not have granted early retirement to members in the period leading up to the company’s demise," he said. "Rather, it is argued, they should have realised the scheme was under-funded and at least have scaled down these benefits accordingly."

The case is ongoing. But, whatever the outcome, Trenner believes former trustees will be looking at their personal assets with concern.

"The Blyth & Blyth case may not be typical, but it’s hard to believe it will not create a precedent for other independent trustees," he said.

"This begs the question: Why would anyone want to be a pension fund trustee?"