Issuing a 'trustee P45' – is firing scheme reps ever justifiable?

But when the board’s ability to make effective decisions becomes inhibited by the disruptive influence of one of its members, an employer or trustee chair may want to take matters into their own hands.

You do get situations where trustees have a particular axe to grind

Colin Richardson, PTL

Colin Richardson, client director at professional trustee company PTL, said the right of the employer to remove an employer representative or trustee board chair would normally be made clear in the scheme’s rules.

But he added: “For a member-nominated trustee that is actually quite difficult and it has to be quite extreme for it to happen.”

Ian McQuade, client director at governance consultancy Muse Advisory, said if a trustee is raising a valid point that needs to be considered by the board then this should be encouraged.

“In most cases debate is a good thing, debate should be encouraged,” said McQuade. “Trustees that participate, that question, certainly I would say on the whole these trustee boards will make good decisions because they’ll assess all the options and at the end of it they will make a decision which is in the best interests of the members.”

He said it can be difficult to remove an MNT and would require justification to members who may question why their representative is being removed from the board.

The Pensions Regulator is able to remove trustees from a scheme’s board under section three of the Pensions Act 1995.

This states a person may be prohibited from being a trustee in circumstances including when they have breached their duties to treat members equally.

However Mark Howard, partner at law firm Clyde & Co, said: “More important is section seven, which talks about appointments of trustees. That’s also quite an important one because that’s a good line for the regulator to use.”

This enables the regulator to appoint trustees including where it is necessary, to ensure the scheme has sufficient knowledge and skill for the proper administration of the scheme.

This was amended by the Pensions Act 2008, which replaced “necessary” with “reasonable”, giving the regulator more scope to intervene. However Richardson said it is rare for trustees to intentionally disrupt the board.

“You do get situations where trustees have a particular axe to grind,” said Richardson. “It might be because they can’t take that step away from their role – which might be outside other trustee roles… representing a certain group – and their role on the trustee board, which is representing all members.” 

This could include circumstances where a trustee represents a category of member that may be affected by a decision, for instance to change future benefits.

McQuade said people management is key to ensuring trustees’ judgment does not become clouded by factors other than the best interests of members. A clear conflict policy can be effective in helping quell situations such as these.

“If there is something on the agenda, if there’s a particular corporate transaction taking place and one of the trustees is the FD, they would hold their hand up at the start and say, ‘I will step outside the room’,” McQuade said.