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Small Schemes Seminar

Small Schemes Seminar. 17 July 2008. Governance – Trust and Contract. David G Johnson. Trustee GAAPS. Back to basics. Trust vs Contract Old vs New Traditional vs Innovation. Background to trusts. Legal Settlement basis Transfer assets to safe haven Concept of trustees

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Small Schemes Seminar

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  1. Small Schemes Seminar 17 July 2008

  2. Governance – Trust and Contract David G Johnson Trustee GAAPS

  3. Back to basics • Trust vs Contract • Old vs New • Traditional vs Innovation

  4. Background to trusts • Legal Settlement basis • Transfer assets to safe haven • Concept of trustees • Trustee Investment Acts (1925 – 1961) • Duty of Care & Power of Investment • Fiduciary responsibilities

  5. Raft of Legislation & Standards • Finance Acts • Social Security Acts • Pensions Acts • Data Protection Act

  6. Standards and Codes • Financial Standards • Codes of Practice • EU Law • Equality/Non Discrimination • Barber (1991) and so on

  7. Standards and Codes • Funding Standards • Member Nominated Trustees (MNT) • Trustee Knowledge and Understanding (TKU)

  8. Regulators • Accounting Standards (FAS, FRS, IASB etc) • The Pensions Regulator (TPR) • Pensions Protection Fund (PPF)

  9. Funding and Investment • Statement of Investment Principles • Schedule of Contributions • Recovery Plan

  10. Governance • Trustee Training • Internal Controls • Service Level Agreements with Advisors

  11. Governance Basics • Role of Chairman, Trustee & Secretary to Trustees • Conduct of Trustee Meeting (Agenda, Minutes etc) • Role of Advisors (Actuary, Accountant, Administrator, Investment Manager) • Conflicts of Interest

  12. Unexpected Consequences • Financial Penalties • Custodial Penalties • Potential for Fines and Imprisonment • Pensions/Financial Ombudsman • Litigation

  13. Trust vs Contract • Have I said enough? • Trustee role carries considerable responsibilities with not insignificant risk • Issues of Supply and Demand

  14. Alternative Contract Based • Much of all listed does not currently apply • Watch this space!! • TPR interest and attention

  15. Alternative Contract Based • Not normally Defined Benefit (DB) • Almost exclusively Defined Contribution (DC) • Risk Reduction

  16. Alternative Contract Based • No requirement for Trustees • No conflicts of interest • But require clear communication with members • Comes down to absolute transparency

  17. What comes out must go in • Employer Contribution • Employee Contribution • Investment Return • Cost of Investment • Cost of Administration

  18. Back to basics • Make sure Employer and members understand likely benefits • Manage Expectations • Or could end up supplementing the benefits from the Employer’s P&L

  19. Governance Trust vs Contract • Questions? • Discussion?

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