Requirements for member-nominated trustees and directors
Section 241: Requirement for member-nominated trustees
873.Sections 241, 242, and 243 replace the existing provisions in sections 16 to 21 of the Pensions Act 1995. Sections 43 to 46 of the Child Support, Pensions and Social Security Act 2000, which were not commenced, are also repealed.
874.Subsection (1)(a) requires trustees of an occupational trust scheme to make arrangements for at least one-third of the total number of trustees to be member-nominated trustees. The arrangements must be put in place within a reasonable time of the section applying to the scheme. The Regulator is required to issue a code of practice on the meaning of “reasonable time” under section 90 of this Act (codes of practice). Subsection (1)(b) requires trustees to ensure the arrangements are implemented.
875.Subsection (2) defines “member-nominated trustees” as trustees of an occupational trust scheme who are nominated by a process in which at least the following are eligible to participate:
all the active members or, an organisation which adequately represents the active members, and
all the pensioner members or, an organisation which adequately represents the pensioner members
876.The meaning of “adequate” will be covered in the code of practice issued by the Regulator under section 90. As the section says “at least” the trustees have the option to involve both members and representative organisations.
877.The selection process must involve some or all of the members of the scheme.
878.If the number of nominations is equal to or less than the number of vacancies, the nominees can be deemed to be selected under subsection (5)(d). Subsection (4) provides that, where an employer approves, the arrangements may provide for more than the minimum number necessary to meet the one-third requirement under subsection (1)(a).
879.Subsection (5) provides more details of the required arrangements. The purpose of subsection (5)(a) is to ensure that the arrangements will not leave vacancies unfilled for an unreasonable length of time, and subsection (5)(b) ensures that unfilled vacancies must be re-advertised at reasonable intervals. Under subsection (5)(c) the arrangements must provide that where the employer so requires someone who is not a member of the scheme must have the employer’s approval to qualify for selection as a member-nominated trustee.
880.Subsection (6) ensures that a member-nominated trustee cannot be removed without the agreement of all the other trustees. Subsection (7) prevents the arrangements excluding member-nominated trustees from exercising functions which other trustees can exercise simply on account of their being member-nominated trustees.
881.Subsection (8) provides for exceptions. The section does not apply in the case of an occupational trust scheme if:
every member of the scheme is a trustee of the scheme and no other person is such a trustee;
every trustee of the scheme is a company (in which case section 242 applies), or;
the scheme is of a prescribed description.
882.Subsection (9) provides for civil penalties under section 10 of the Pensions Act 1995 (civil penalties) to apply to any trustee who has failed to take all reasonable steps to secure compliance if the arrangements securing at least one-third member-nominated trustees are not in place or are not being implemented.
Section 242: Requirement for member-nominated directors of corporate trustees
883.This section sets out broadly the same requirements as section 241, except that it applies where every trustee of an occupational trust scheme is a company. In this case, the requirement is for at least one-third of the directors of each company to be member-nominated directors.
884.The effect of subsections (8) and (9) is to allow a company that is trustee in relation to more than one scheme to treat the schemes as if they were a single scheme for the purposes of meeting the member-nominated directors’ requirement. The company can however elect not to aggregate the schemes.
885.Subsection (10) provides that this section does not apply to an occupational trust scheme if the scheme is of a prescribed description.
886.Subsection (11) provides for civil penalties under section 10 of the Pensions Act 1995 (civil penalties) to apply to a company if the arrangements securing at least one-third member-nominated directors are not in place as required under subsection (1)(a) or are not being implemented.
Section 243: Member-nominated trustees and directors: supplementary
887.Subsection (1) is an order making power that permits the Secretary of State to change the minimum proportion of member-nominated trustees or directors from one-third to one-half.
888.Subsection (2) is a modification power that will be used to modify application of the provision in prescribed circumstances, for example to disregard independent trustees for the purpose of calculating the minimum number of member-nominated trustees or directors.
889.Subsection (3) defines the terms “company” and “occupational trust scheme” for the purposes of sections 242 and 243.