Pension check for trustees

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PENSION scheme trustees are being offered a service that will check the security of pension assets and investigate administrative procedure and documentation.

GMBC Pension Trustees, the professional trustee company of Guinness Mahon's benefit consultancy arm, GM Benefit, is offering the service following the publication, last October, of the Goode Committee Report on the law relating to occupational pensions.

'Although much publicity has been given to headline pension abuses, such as those in which Robert Maxwell was involved, there are many instances in which members and even trustees would be staggered to learn how their pension funds are being operated,' says Ray Coles, GMBC's managing director.

In particular, he said, member trustees need to be satisfied that they will not be in the dark about their personal liability if things go wrong. 'What is most worrying, though, is the areas of abuse that are there, just waiting to be opened up.'

Under the provisions of the 1990 Social Security Act, when a company running a pension scheme goes into receivership, the receiver must appoint an independent trustee to wind the scheme up.

In its work as one of the UK's largest independent trustees, Mr Coles says, GMBC has discovered that though the Maxwell pension fund received all the publicity, it was by no means the only fund in which things had gone wrong.

'We recently took over a firm that should have had pounds 1.1m of assets, and all we could lay hands on was pounds 50,000 - the rest was in the shares of companies connected with the two previous trustees.

'Another example was a scheme in which all of the value of the fund was, effectively, in a piece of land - which is not very wise at the moment. In another the value was placed in land with the assumption that planning permission would be granted - when in fact it is agricultural land.'

GMBC's service is based on the recommendations of the committee chaired by Professor Sir Roy Goode. The committee's findings will be enacted in legislation in the 1994/95 parliamentary year.

'We were surprised that the Goode Committee report did not suggest that there should be an independent trustee for each pension scheme,' Mr Coles said.

'As they are suggesting that the trustees are one-third made up of member representatives, we're worried that those member representatives won't necessarily know their duties.'

For a fixed fee of pounds 6,000, GMBC will go through the rules of the scheme, check on the assets and where they are kept, and warn the trustees where problems could occur. These could range from payment of money from the employer to the pension fund, to whether the administrators are doing their jobs properly.

'So even if the administrator is an outside firm, we would look through all their systems to make sure the money is where they say it is and that it can't walk. We then report back to the trustees and recommend areas where things should be tightened up.

'Member trustees tend to be entirely unaware . . . We will take them through the whole thing in relation to their fund.'

GMBC is targeting the biggest companies but says its service would be useful to any fund with pounds 5m or more of assets.

'Most of the trustees I come across have never read their own trust deed and the rules governing the scheme. And most of those who have don't understand it - so they don't know what their duties are or what they're liable for. What worries me is that many member trustees have been hand-picked by the management, and they're people who won't rock the boat too much. Nevertheless, they have an equal share in the blame if things go wrong.'

(Photograph omitted)