We offer a ‘free of charge’ service to Pension Schemes, their Trustees and Advisers to source and price the availability coverage options of PTL insurance, whether for a live Scheme, or a Scheme that has wound up (or is going through the process of winding up). Only if an insurance policy is taken out and paid for we will receive a commission from the Insurer who has issued the policy. Thus, we do not charge any fees to Pension Schemes, nor to their Trustees or Advisers.
A Pension Trustee Liability Insurance (PTL) policy provides an external resource for reimbursing losses suffered by Pension Schemes and their Trustees following claims made by third parties alleging errors and omissions. It also includes the vitally important cover of defending claims and allegations, and any costs concerning mitigation.
Such losses or alleged losses might be suffered as a result of Wrongful Acts (for example Breach of Trust, Negligence, Misrepresentation or Maladministration) involving the actions of the Trustees to the Pension Scheme. Other risks that can be covered include civil fines and penalties imposed on the Trustees by The Pensions Regulator and Ombudsman complaints.
A Pension Trustee Liability Insurance policy can also provide cover for Overlooked Beneficiaries where a Pension Scheme has been, or is being, wound-up.
Live Policies cover Trustees of ‘Live’ Pension Schemes (where assets are still being held) and usually run for a period of 1 year before being renewable. This can sometimes be adjusted so that the first year’s policy falls due for renewal at the end of the Scheme’s accounting year.
Run-Off Policies cover Trustees whose Schemes have been wound-up and should run for as long as the Trustees (or the Sponsoring Company or Scheme) can afford. Overlooked Beneficiary cover can be included to provide additional comfort to the Trustees. Run-Off and OBI policies are available for periods of up to 15 years – or even longer in some circumstances.
It is important to remember that the policies cover defence costs as well, therefore the Trustee does not necessarily have had to have done something wrong in order for the policy to pay out, someone only has to accuse them of having done something wrong.
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We will discuss with you how to identify your demands and needs for insurance, or those of the clients you are representing. At your request, we can visit you to help you understand what is available from the insurance market.
On receipt of a brief Indication Request Form we will seek indicative terms from a range of Insurers in the market, giving you alternatives and choices to consider as well as factoring for budget purposes.
We will consult with you so that the features and benefits of what the insurance market is proposing is fully understood. We will appraise the different Insurers’ policy wordings and discuss with you the amount and duration of the cover.
If and when you want to firm one or more Indications up into binding Quotations, we will steer you through that process keeping it as simple and streamlined as possible.
Ours is an ‘end to end’ service, so we offer ongoing advice and assistance in the event of a circumstance or claim that needs to be notified to the Insurer.
In order for us to seek indications/offers for you, please complete whichever Indication Form below is the more appropriate and return it to us. Our service is free of charge, however we will get paid a commission by the Insurer if a Policy is taken out.
Use this Form if assets are still wholly held within the Scheme.
Use this Form if the Scheme has been discontinued/wound-up, or is winding-up or being wound-up.
We have compiled a list of frequently asked questions and their answers. But if your question is not listed, do call or email us.
The cost varies from Scheme to Scheme and according to the Insurers’ perception of the level of risk they are being asked to take. We frequently find that Employers and Trustees are pleasantly surprised by what the cover costs. We would emphasise that it costs you nothing to find out how much PTL cover might cost.
PTL insurance protects Pension Schemes and their Trustees against claims made by third parties for matters including Breach of Trust, Maladministration and Wrongful Acts involving the actions of the Trustees to the Pension Scheme. It can also provide cover for Overlooked Beneficiaries where a Scheme has been or is being wound-up. The policies also provide cover for any costs incurred in defending claims.
PTL insurance should be taken out sooner rather than later. When Trustees act for Pension Schemes they become liable for any actions undertaken (or, possibly, actions not undertaken) and whilst the Scheme is still open a Live Policy taken out on a yearly basis can protect them. Even when a Scheme is ‘wound-up’, the Trustees’ liability continues. Run-Off cover should be purchased when winding up a Scheme to protect the Trustees’ continuing liability.
Live Policies usually run for a period of 1 year, however this can sometimes be adjusted so that the first year’s policy falls for renewal at the end of the Scheme’s accounting year. Run-Off cover should run for as long as the Trustees (or the Sponsoring Company or Scheme) can afford.
You do not need to buy as much cover as the Scheme has in assets. This would imply that all of the work the Trustees undertake could be questioned. It is, however, important to remember that the polices cover defence costs as well, therefore the Trustee does not necessarily have had to have done something wrong in order for the policy to pay out, someone only has to accuse them of doing something wrong. It is sensible to start off with a Limit of Indemnity of 20% of the Scheme assets and work from the premium that is generated from that.
We would always advise anybody to buy as much as they can afford, as much as they can justify to themselves to pay. The key issue though on PTL is that the Limit of Indemnity you can buy is usually an aggregate Limit of Indemnity. So, by way of an example, if you buy a limit of £1,000,000 and have a claim for £750,000, there is only £250,000 of cover left. That needs to be borne in mind, but always get a quote because people are invariably amazed at how cheap it is to buy the cover.
Pension Trustees have, at times, weighty duties or responsibilities to their members. These result from the fact that they have a personal responsibility and could be found personally liable for any loss arising out of the actions (or lack of them). Their duties and responsibilities were clarified under the Pensions Act 2004 which introduced a new statutory requirement for Trustee Knowledge and Understanding.
There is a considerable amount of legislation that can lead to potential personal liabilities for Pension Scheme Trustees. In the light of this, it is certainly worth protecting yourself against the risks.
Most Pension Scheme Trustees surround themselves with advisers, many (if not all) of whom take out a Professional Liability Insurance Policy (Professional Indemnity) to cover them for any errors or omissions that they might make. This is done usually because it is a requirement of their regulatory body(ies) to protect their clients (you) and the equivalent for Pension Trustees would be Pension Trustee Liability Insurance (‘PTL’), thereby protecting the members.
Depending upon the wording, a standard Directors’ and Officers’ (D&O) cover may provide an element of cover for Pension Trustees, however there may be problems. The scope of cover may not automatically include all Trustees, there may be specific exclusions included or a smaller amount of cover (an inner limit) available for the Pension Scheme. Problems may also occur at future renewals if the policy is renewed on differing conditions.
We recommend that Pension Trustees empower themselves to take control of the coverage available to them by arranging a specific PTL policy.
Both of them can work, and both of them have worked, the trouble is that as with any sort of contract the exoneration clause in particular needs to be very carefully and finely tuned to what people want. If there is a dispute as to whether or not the clause applies there can be areas of grey rather than black or white. Should the matter find its way to a Court, a Judge might take a disparate view on what the actual wording says. There could be an intention to provide exoneration but in fact the words on the page may not reflect that, so the Trustee can be left high and dry.
The indemnity principle, the indemnity clause or the letter of indemnity (as they can sometimes be called) relies on the Sponsoring Employer still being around (i.e. solvent) to honour that indemnity. In today’s climate, that is not a certainty.
Either party can buy cover. Normally, Trustees like the company to buy it because it tends to imply that the company is going to pay the premium! The Trustees can buy it if the Employer is unable to, but they will have to pay the premium. Many if not most Trust Deeds allow the PTL premium to be paid out of the Scheme itself.
Whatever the circumstances, we would suggest that even if the Sponsoring Employer is prepared to pay the premium, the Trustees should change the rules to allow them to pay the premium at a future date. This is because circumstances can change and if the Sponsoring Employer gets into financial difficulties which reflect on the Scheme, the rules cannot be changed to allow that to happen.