THEPENSIONSINSURANCE SPECIALISTProtecting Trustees, Schemes, Members & Employers

REPORT 33OPDU

OPDUIS MANAGEDBY THOMASMILLER

All views expressed in this publication are those of theirauthors and do not necessarily reflect the views of OPDU Ltd,ACE European Group Ltd, Thomas Miller & Co Ltd or anyemployees or agents of those companies. The articles do notnecessarily deal with every aspect of the topics covered andare not designed to be professional advice.

CONTENTS

02 Continuity and change… New appointments at OPDU

03 It was 20 years ago today… Jonathan Bull’s retirement

04 A year in the life of OPDU Terry Faulkner looks back

05 OPDU Offers New Products A new insurance products unveiled

06 OPDU Annual Meeting Pensions: People should complain more often!

08 OPDU launches in Ireland

09 How OPDU differs in the Insurance Market

10 Annual Pension Risk Conference Managing change and emerging pension scheme risks

12 Some Key Issues for Trustees

13 Diary Dates 2016

14 Insurance for schemes winding up

15 Trustee protection

16 Guide to Policy Wording

18 Increased peace of mind OPDU has secured a big increase in the cover available to members

19 Claims - case studies

20 The Pensions Insurance Specialist: Protecting Trustees, Schemes, Members & Employers

21 AMNT News Janice Turner, Founding Co-Chair, AMNT

22 News from the Pensions Archive Alan Herbert Chairman, The Pensions Archive Trust

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OPDU REPORT 33

Redvers Cunningham

Redvers is a barrister and has worked at Thomas Miller, OPDU’s parentcompany, since 1994. He has been involved in the management of OPDUsince it was established with specific responsibility for policy drafting,insurer relations and claims. He is also Chief Executive of Thomas MillerProfessional Indemnity, which manages mutual insurance companiesinsuring barristers, patent attorneys, trade mark attorneys, architects andsurveyors and provides after-the-event legal costs insurance in commercialdisputes. Having been part of the OPDU team for twenty years he isideally placed to lead the business forward after Jonathan’s retirement.

Martin Kellaway

Martin holds an MBA and is a Fellow of the Chartered ManagementInstitute. Martin joins OPDU with many years of experience in thepensions industry with a number of well-known companies. His work hasincluded pensions assurance, buyouts, trustee and consultancy businesses.His appointment will strengthen OPDU’s strategy and marketingoperations and ensure that members continue to derive full benefit fromtheir membership of OPDU. Martin is also a trustee of the CMIRetirement Benefits Schemes.

Continuityand change…Following Jonathan Bull’s retirement,Redvers Cunningham has been appointedChief Executive of OPDU and Martin Kellawayhas joined as Executive Director

NEWS

It was 20 years ago today…Jonathan Bull retires leaving the world of occupational pension schemesin good hands

After 20 years leadingOPDU, Jonathan Bullretired on 31 July 2015,safe in the knowledgethat the trustees lookingafter his occupationalpension are properlyinsured in the unlikelyevent that anything goeswrong!

We look back at theimportant contribution hehas made to protectingoccupational pensionschemes and raisingstandards inadministration.

Pensions Act 1995

When the Pensions Act was passedin 1995 trustees and sponsoringemployers started to discuss how torespond to the new regulatory risksand liabilities they would face on itsimplementation in 1997.

Enlightened leaders in theoccupational pensions movementthought that insurance could havea role to play in protecting pensionschemes and improving riskmanagement. Many trustees andconsultants had heard of a companycalled Thomas Miller which specialisedin the management of mutualinsurance companies. They approachedit to see whether it could establish amutual to protect occupationalpension schemes. Jonathan Bull hadjust been promoted to BusinessDevelopment Director and was askedto examine the feasibility of setting upa new mutual.

Mutual to the core

Jonathan had started his career atThomas Miller in 1977 aftercompleting his law degree. He hadspent the first decade or so of hiscareer on the marine side of thebusiness, insuring the liabilities of shipowners. He readily appreciated howlessons learned from losses, some ofthem tragic, could be shared withmembers to prevent similar lossesoccurring in the future. He ledinitiatives to promote what weknow today as risk management.

He then developed a successful newmutual insuring housing associationsagainst the cost of repairing latentdefects in newly built properties.A strong focus on risk managementwhich resulted in substantialimprovements in the quality of socialhousing construction was integralto the product. Following thissuccess Jonathan was ready for a newchallenge when occupational pensionfunds started knocking on his door.

Establishing OPDU

Jonathan established a steeringcommittee and, after a lot of hard work,OPDU was born. It was an innovativehybrid of the strong service and riskmanagement ethos of mutuals and theunderwriting strength of one of theworld’s leading insurance companies,ACE. OPDU got off to a flying start,with firms like Sainsbury’s and Philipsjoining as soon as it was launched in1997, and it has since gone on tobecome the leading specialist insurancearrangement for occupational pensionschemes.

Innovation

Key to OPDU’s success was Jonathanand his team’s focus on ensuring thatthe cover and services provided byOPDU met the changing requirementsof its members. Achieving this objectivewas aided by establishing an AdvisoryCouncil and Advisory Panel and byregular contact with regulators andindustry bodies. This has resulted inOPDU leading the way in developingcomprehensive cover for occupationalpension schemes and offering insurancewhich, to this day, remains unique.

OPDU has helped improve the standardof administration in pension schemesand thereby reduce losses by sharing theknowledge it has built up in seminarsand the OPDU report and by initiativessuch as the Annual Risk Conference.

A new era dawns

As Jonathan begins to enjoy his well-earned retirement OPDU will continueto focus on delivering the broadestpossible cover and highest level ofservice to members. RedversCunningham, who worked withJonathan on establishing OPDU fromthe outset, has succeeded him as ChiefExecutive and Martin Kellaway hasjoined as Executive Director fromKPMG to further strengthen theexecutive team.Redvers Cunningham, Martin Kellaway and Jonathan Bull

One year on from myappointment as Chairmanof OPDU’s AdvisoryCouncil, I am pleased toreport that OPDU hascontinued to grow. Therehas also been a substantialincrease in the provision ofdiscontinuance and run-offinsurance for trustees ofdefined benefit schemeswhich are winding-up,including where buy-outsare being arranged.

There were a number of notabledevelopments during the yearincluding:

� The introduction of an “Each and Every Claim” option. Historically, trustee indemnity policies provided an annual aggregate limit of cover for all claims notified during the policy year. Now, for a modest additional premium, OPDU members can request their cover is provided on an “Each and Every Claim” basis. If the level of aggregate cover is (say) £10m, this option allows multiple unrelated claims of up to £10m to be paid instead of the cover being exhausted once total claims of £10m have been paid.

� Following dialogue with the IrishAssociation of Pension Funds,solicitors and pension schemes’trustees & managers in the Republicof Ireland, OPDU will be offering itscover and services in Ireland.

� OPDU and the PensionsManagement Institute (PMI) havejoined forces to further raise theprofile of good governance byoffering discounted membership ofthe PMI Trustee Group. In addition,there will be favourable considerationby OPDU when assessing future ratesfor trustee indemnity insurance forschemes whose boards havesuccessfully completed the voluntaryOPDU/PMI trustee CPD scheme.

The value of OPDU’s cover and servicesis best demonstrated when it comes toclaims. Being forewarned of thecommon pitfalls is one of the mosteffective ways of preventing claims andOPDU continues to highlight thesewithin the OPDU Report.

At any one time, OPDU will haveapproximately 50-60 open claims files.

Not all of these will give rise to claimssince some are simply notifications ofissues that will be resolved without theneed to make a claim on the policy.Individual claim sums of up to £20mhave been notified, with an increasingnumber involving DC schemes. Acontinuing trend is for claims involvinginaccurate data and we do recommendtrustees ensure that regular data healthchecks are carried out.

OPDU has receivednotifications arising from:

� Incorrect investment of DC contributions� Pension sharing orders � Overpayments of benefits � Split payments of benefits� Tax liabilities� PPF levy issues� Equalisation issues (still coming to light)� Regulatory investigations where, even if no claim is ultimately made, cover is provided for the often very significant expenses incurred in dealing with investigatory matters.� There have also been several claims relating to defective scheme amendments which have been discovered some years after the amendments were made with large sums involved

It is not possible to eliminate thepossibility of a claim entirely but the riskcan be mitigated by carefully followingthe Codes of Practice and the guidanceprovided by the Pensions Regulator andto ensure that Schemes are covered by acomprehensive trustee insurance policy.

Terry FaulknerOPDU Advisory Council Chairman

NEWS

A year in the life of OPDUTerry Faulkner reflects on recent developments

NEWS

OPDU has teamed upwith its primaryinsurance partner ACEto offer a range of newinsurance products toits members. These include Directors’& Officers’ liabilityinsurance, fidelity &crime insurance andemployment practicesliability insurance.OPDU can also arrangeprofessional indemnityinsurance andafter-the-event legalexpenses insurance.A brief summary of eachproduct is set out belowand more informationcan be provided onrequest.

Directors' & Officers

Directors of companies haveunlimited personal liabilities inthe event of negligence and faceincreasing regulatory and other risks,which can see them exposed toconsiderable legal expenses defendingthemselves. D&O cover is provided toprotect the personal assets ofindividuals involved in themanagement of companies and toreimburse the company where itprovides an indemnity to directors.Claims covered by the insurancetypically include actions byshareholders, clients and regulatorsfor negligence, breach of fiduciaryduty and breach of statutory duty.

Fidelity & Crime Insurance

Fidelity & Crime insurance is designedto protect companies from thedevastating effects that criminalactivity can have on them. It protectscompanies from losses arising fromfraud committed by employees andfraud on the company by third parties.This can take the form of computercrime, forgery, counterfeiting andtheft. Cover can also be extendedto contractual penalties, interestand extortion.

Employment PracticesLiability

Companies are increasingly facedwith the prospect of large claimsfor unlawful and wrongful dismissalor damages for discrimination in theworkplace. Employment PracticesLiability insurance protects thecompany, its directors, officers andworkers from the cost of defendingthese claims and damages and costspayable to the claimant followingjudgment or settlement. The covercan include wages payable to an

employee for the period betweendismissal and reinstatement orre-engagement, if that is lawful,and punitive and exemplarydamages, where it is lawful toprovide that cover.

After-the-event legalexpenses insurance

After-the-event legal expensesinsurance (ATE) insures litigantsagainst the cost of bringing and losingproceedings where they do not haveother or sufficient legal expensesinsurance to bring a claim. Thisinsurance enables businesses and trustfunds to hedge the risk of having topay costs to a defendant when a case islost. It can also be used to reimbursedisbursements, such as counsel’s andexperts’ fees. Insurers typically expecta case to have at least a 60% chance ofsuccess and may agree that some of thepremium is only payable in the eventof a successful outcome. Trustees mayfind this insurance particularly usefulas a means of protecting scheme assetsin circumstances where they wish topursue a claim against an adviser orservice provider.

Professional indemnityinsurance

Professional indemnity insurance istaken out by professionals to respondto claims by third parties arising fromthe provision of their services.Thomas Miller, the Manager ofOPDU, has been involved inprofessional indemnity insurance for30 years, managing successful mutualsfor barristers and patent and trademark attorneys. A whole range ofservice providers need professionalindemnity insurance and OPDU isable to arrange such cover.For further information pleasecontact enquiries@opdu.com

OPDU Offers New Products

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ANNUAL MEETING

Speaking at OPDU’s annual meeting,Tony King, who at that time was thePensions Ombudsman, surprised hisaudience by suggesting that he didn’tget enough complaints. He said that thePensions Ombudsman probably gotabout one thousand complaints a year,which felt a bit low. His concern wasthat the process for making complaintswas so complicated that only the mostpersistent got through.

However, there were other factors thathad led to a fall in complaints, notablythe impact of improved regulation, andthat encouragingly, the number ofcomplaints relating to deliberate wrongdoing was small, with the majorityrelating to issues such as delays.

Having announced his intention to standdown later in the year after a seven and ahalf year tenure that was the longest sincethe role had been created, Tony took theopportunity to look back on his time inthe post, highlighting successful changesin culture, processes, and communication.Challenges remained, particularly relatingto “pension scams” and making the mostof limited resources. However, he said ithad been an honour to have held thepost, which he had enjoyed.

Tony was followed by Paul Craven, aspecialist in Behavioural Economics anda member of the exclusive Magic Circle,who was therefore able to appreciatehow the mind can play tricks. Paulbelieved that it was important in bothour professional and private lives tounderstand the way we make decisions.Far from being completely rational, therewere more than one hundred and fiftymodern day biases.

There were effectively two systems ofdecision making: the first was fast,unconscious, reactive, and emotional,whilst the second was slow, conscious,analytical and rational. The evidencesuggests we use the first system morethan we think when actually we need touse the second system more often.

Drawing on a number of insightful andentertaining examples, Paul said that weneeded more psychology with oureconomics. In conclusion, bias awarenessreduced our errors and increased ourinsight, and for really important decisionsit was important to ask which decisionmaking system we were using.

Terry Faulkner, Chairman of OPDU’sAdvisory Council, had opened his firstannual meeting by paying tribute to thework of his predecessor Peter Murray,who had chaired the Advisory Councilfor six years and helped developOPDU’s comprehensive offering.

Notable developments in the last twelvemonths included the ability to offerlifetime cover for discontinuance andrun-off cover, and the introduction ofthe option to have insurance based on an“Each and Every Claim” basis, ratherthan on an aggregate claims limit ofliability. Forthcoming developmentsincluded the launch of cover and servicesin Ireland, and a joint initiative with thePensions Management Institute (PMI) topromote membership of the PMI TrusteeGroup. Favourable consideration wouldbe given when assessing insurance ratesfor those schemes whose boards hadcompleted successfully the voluntaryPMI Trustee Group continuingprofessional development scheme.

Terry reported that OPDU’s member-ship continued to grow and had nowreached 880 schemes holding assets inthe region of £240 billion. Following aquestion and answer session, a receptionwas held with Reed Smith’s officesproviding spectacular views of London’sskyline at night.

The event was organised very efficientlybetween OPDU and Reed Smith, withparticular thanks to Lisa Wilson, KayeLambert, Nicole Pool, Angela Georgeand Karen Turner.

Tony King

Paul Craven

Pensions: People shouldcomplain more often!

NEWS

OPDU has extended itsunique protection forpension funds to theRepublic of Ireland.This move followsextensive consultationwith the Irish Associationof Pension Funds,lawyers, other consultantsand trustees of Irishpension schemes.

OPDU’s new Chief Executive, RedversCunningham, and his predecessor,Jonathan Bull, formally launched theIrish policy in Dublin in May. Theyalso attended the IAPF’s Annual DCConference, where Jonathan wasdelighted to be a panellist and be ableto share OPDU’s experience ofemerging risks in the UK likely toaffect schemes in Ireland.

Heightenedrisk awareness

The launch came hot on the heelsof some cases against trustees in Ireland.These included the case known asElement 6 where trustees faced therisk of personal ruin for their decisionto accept an offer from the sponsoringemployer to make a one-off paymentof €37.1m.

The plaintiffs, disappointed beneficiaries,argued that the trustees should haveissued a contribution notice for€129.2m to make good the deficit in thescheme. In the end the court found in

favour of the trustees, who it consideredhad weighed up all the issues and cometo a reasonable decision in good faith inwhat they considered to be the bestinterests of the beneficiaries.

But this and other cases have highlightedthat trustees are vulnerable to being suedand the high cost of defending claims.

One of the major benefits of OPDUcover is the indemnity for legal costsincurred in defending claims, whichsometimes can run into seven figures.

Ireland specificpolicy wording

OPDU’s policy wording has beentailored to meet the requirementsof pension funds in Ireland, whilstmaintaining the exceptionally broadcover provided in the UK. The cover isalso underwritten by ACE, which hasprovided OPDU’s insurance cover sinceit started business in 1997.

As in the UK, OPDU will workwherever possible with the pensionscheme’s existing advisers to resolveproblems when they arise, applying itsunrivalled experience of dealing withclaims against trustees to the benefit ofmembers in Ireland.

Exciting times

As OPDU approaches the twentiethanniversary of its founding, it is veryexciting to see it expand internationally.Trustees in Ireland and otherjurisdictions face many of the samerisks and challenges as those in theUK and it makes perfect sense forthem to have access to OPDU’scomprehensive insurance and riskmanagement services.

For further information pleasecontact enquiries@opdu.com

OPDU launches in Ireland

Jonathan Bull, Jerry Moriarty (CEO, IAPF) and Redvers Cunningham

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OPDU

The following might behelpful as a reminder ofthe aspects of cover andservices which tend todifferentiate OPDU fromthe cover providedelsewhere:

The Policy contains a broad definitionof Exonerated Loss which is relevant toUK pension schemes. To be compre-hensive in the scope of cover provided,the OPDU Elite policy states that“The Insurer will pay on behalf ofthe Pension Scheme all Exonerated Losswhich is suffered as a direct consequenceof a Wrongful Act by a Trustee…” andthere is a definition of Exonerated Loss.Similarly, the Policy also covers anyindemnity which may have beenprovided to the Trustees by thesponsoring employer and/or from theScheme.

In several market policies, the cover inrespect of retired trustees tends to belimited to 6, 10 or 12 years, whereas theOPDU Elite Policy has lifetime coverfor retired trustees and importantly, thebenefit of cover also extends tocompany employees.

Other factors to consider are how thepolicy will respond to costs incurred intaking action to prevent, limit ormitigate exposure to potential claims;costs related to occasions when ThePensions Regulator or other Authoritymakes some enquiries or conducts aninvestigation and it is beneficial to havean adviser instructed. The OPDU ElitePolicy also provides cover for: publicrelation expenses to limit negativepublicity on a scheme's or employer'sreputation; expenses incurred todisseminate the findings of a finaladjudication in favour of the Insured

and importantly, as an option, thirdparty service provider pursuit cover forthe purpose of establishing a breach ofprofessional duty of care.

The third party service provider pursuitcosts cover is for legal costs inestablishing a breach of contractualduty or professional standard of care bythird parties for matters that might falloutside the scope of the main OPDUElite policy thereby ensuring that theoverall insurance protection under theOPDU Elite policy is as broad aspossible.

A Third Party Service Provider isdefined in the policy as "those personsdeclared in the Proposal as having beenappointed by the Trustee, PensionScheme or Sponsoring EmployerCompany to provide services inrelation to the Pension Scheme".

The definition is therefore wider thanpure advice and includes any serviceincluding the service provided to thescheme by administrators, lawyers,actuaries, custodians and investmentconsultants etc. Whether a serviceprovider has made an error would bedefined by whether or not they had aduty to provide the particular servicethat gave rise to the error.

The cover for Civil Fines & Penalties isintegral within the cost of the OPDUElite Policy and is not limited toactions taken by the PensionsRegulator. It includes all the authoritieswho may be involved i.e. the PensionsRegulator, the Pensions RegulatorTribunal and Determinations Panel, thePPF or equivalent body or entity, theInformation Commissioner (dataissues), any government body or agencyand also the Pensions Ombudsman.

We are unaware of any other policywhich gives the cover provided by theCourt Application Costs Extension.This cover is optional, however, it is

commonly purchased by larger OPDUmembers. Sometimes issues arise wherethe trustees are advised to seekdirections or a declaration from thecourt as to future conduct of matters orthe interpretation of trust documents.Normally, several interests have to berepresented by separate lawyers and allthe parties’ costs have to be met out ofthe pension scheme. OPDU’s CourtApplication Costs Extension,reimburses costs ordered to be paidfrom the pension scheme's assets.Reported examples of substantial legalcosts being incurred include the HighCourt decision in the National Busprivatisation case with costs exceeding£1 million; the South West Trains casein which the pension fund paid £1.4million in legal costs and the NationalGrid litigation in which the legal costswere reported to be in excess of £3million.

The breadth of cover provided isfundamental but perhaps just asimportant, is how matters will be dealtwith in the event of a problem or claimarising. Market underwriters commonlyappoint their own lawyers to handleclaims rather than using the services ofthe employer's and/or scheme's existingadvisers. In contrast, our claims serviceprovides a specialist claims handlingservice through a team of in-houselawyers and pension professionals whodeal with claims in a sympathetic andprofessional manner under claimsauthority from the insurer. They areexperienced in managing complex,sensitive disputes with due regard to theadverse publicity that litigation canattract. Importantly, we will alwayswork with a scheme's existing advisersunless they have been at fault. Ourclaims service is included as an integralpart of OPDU membership.

Finally, the superior credit rating forACE (Europe) as the underwriter isalso relevant for the long term.

How OPDU differs in theInsurance Market

ANNUAL PENSION RISK CONFERENCE

Managing change andemerging pension scheme risksHeld at Dexter House, Royal Mint Court, London

Terry Faulkner Chris HitchenRobin Ellison Steven Hull

Hannah Simons Gary Smith Greg Thorley James Walsh

OPDU held its fifth Annual PensionRisk Conference on 3rd March, whichfocussed on managing change andemerging pension scheme risks. Thetheme was particularly apposite given thenumber of significant changes currentlytaking place.

Terry Faulkner, Chair of OPDU’sAdvisory Council, welcomed almost150 delegates to the conference, beforeintroducing Robin Ellison, Head ofStrategic Development for Pensions atPinsent Masons and also a member ofOPDU’s Advisory Council, who gavethe key note address.

The morning sessions concentrated ondefined benefit pension scheme risksand focussed on innovative approaches tode-risking; understanding and controllinginvestment fees; and the significance ofEuropean developments and what thesemight mean for UK pension schemes,

their trustees, and sponsoring companies.

After lunch, attention turned to issuesaffecting defined contribution pensionschemes where the sessions consideredwhat schemes might look like in fiveyears’ time; financial education andmember communication; and the risksassociated with defined contributionschemes and member education.

There were a number of lively paneldiscussions, which benefited from theknowledge and insight of the highcalibre speakers who are named below.The feedback OPDU has receivedfollowing the conference has beenexcellent.

To view the speaker videos from theconference, visit www.opdu.com andclick on the link on the Bulletin Board.

Speakers

Terry Faulkner – Chairman of OPDUAdvisory Council and former NationalAssociation of Pension Funds (NAPF)Chairman

Robin Ellison – Head of StrategicDevelopment for Pensions, PinsentMasons, OPDU Advisory Councilmember, and former NAPF Chairman

Chris Hitchen – Chief ExecutiveRailways Pension Trustee Companyand former NAPF Chairman

Steven Hull – Partner, Eversheds

Hannah Simons – Associate Director,Russell Investments

Gary Smith – Head of DC Consulting,CapitaGreg Thorley – Director, Life Academy

James Walsh – EU and InternationalPolicy Lead, NAPF

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OPDU

Here is our latest updateon some of the issues thatare currently receivingattention by trustees.

DefinedBenefitSchemes

Scheme FundingGuidance

Those trustees undertaking an actuarialvaluation should be taking account ofthe Pension Regulator’s 2015 definedbenefit statement which builds uponthe Code of Practice on fundingdefined benefits issued in 2014.It reaffirms the requirement for anintegrated approach focussing onfunding, investment and covenant risksand how they interact with each other.Trustees of schemes with a 2014valuation date are expected to takeaccount of post valuation experiencebefore finalising their valuations.

Assessing andMonitoring theEmployer Covenant

The Regulator has identified thatcovenant is the starting point whenadopting an integrated approach todefined benefit scheme funding andin August issued updated regulatoryguidance on assessing and monitoringthe employer covenant. It containsa useful at a glance summary as wellas sections for those who assess thecovenant themselves, with othersections on monitoring the covenantand improving scheme security. Furtherguidance is expected on integrated riskmanagement and investment strategy.

The End ofDefined BenefitContracting-Out

Companies who have defined benefitschemes that are still open for futureaccrual are considering how to respondto the abolition of contracting-out inApril 2016. Changes to or closure oftheir schemes are likely to beconsidered to compensate for the lossof national insurance rebates andamendments to benefits that refer tostate pension.

Freedom andChoice

Trustees are considering their transferprocedures in light of the newfreedoms available within DCarrangements. This includes whetherto incorporate a transfer value figurewithin retirement packs, whether anysupport should be offered to membersand checking that financial advice hasbeen received before transfer valuesover £30,000 are paid. Trustees are alsoconsidering their procedures to ensurethey are compliant with regulatoryrequirements, as well as reviewing thetransfer value basis with the schemeactuary and communications with thescheme administrators.

DefinedContributionSchemes

Freedom andChoice

If they have not already concludedwork in this area, trustees areupdating their default funds and

communications, as well as putting inplace procedures to monitor memberbehaviour to ensure default funds andother fund choices remain appropriate.A review of support for membersduring the decumulation process isanother important area to help achievegood member outcomes.

Charge Cap

Member-borne deductions (excludingtransaction costs) under “default funds”of qualifying schemes have been cappedat 0.75% of funds under managementsince 6 April. Trustees are monitoringcharges to ensure they are compliantand remain competitive.

Value forMoney

Trustees are assessing and reporting onthe extent to which member-bornecharges and transaction costs undertheir scheme represent good value formoney. This area is likely to evolve andtrustees are working with their adviserson how best to undertake this exercise.The industry is considering how itshould report transaction costs.

Annual GovernanceStatement

Trustees are required to design defaultfunds in members’ best interests andreview them regularly. They are alsorequired to prepare a statement ofinvestment principles for their defaultfund(s) and ensure core financialtransactions are processed promptlyand accurately. An annual governancestatement covering these and otherareas is required which needs to besigned by the chair of trustees. Trusteesare working with their advisers todevelop these statements.

Some Key Issuesfor Trustees

General

Lifetime andAnnual Allowances

The Lifetime Allowance for taxfavoured pension provision will reducefrom £1.25 million to £1 million from6 April 2016 with the Allowance to beindexed by CPI inflation from 2018.Protections will be available as theywere when earlier changes were madein 2012 and 2014.In addition, in theSummer Budget 2015, the Chancellorannounced details of the tapered AnnualAllowance for high earners from 6 April2016, with immediate transitionalarrangements. The details relating to theAnnual Allowance are complicated andtrustees will want to review communi-cation material and understand what themeasures mean for their schemes and beready to cope with a potentially largevolume of enquiries. Preparation will berequired to ensure the scheme canmanage the many different types ofAnnual Allowance that will apply in thefuture.

Taxation of Pensions

In the Summer Budget, the Chancelloralso announced a review of the taxationof pension provision with theconsultation concluding by the end ofSeptember. Amongst the possibilitiesbeing considered is a change from thecurrent tax regime where contributionsand the fund are largely exempt from taxbut the benefits when drawn, (with theexception of the tax free lump sum) aretaxed. This is known as Exempt,Exempt, Taxed. An alternative system,similar to that under which IndividualSavings Accounts operate has beensuggested, where contributions are madefrom taxed income but the fund and thebenefits when drawn are largely freefrom tax. This is known as Taxed,

Exempt, Exempt. The increasing cost oftax relief is highlighted, with a desire toachieve an incentive for long termsavings on a sustainable basis theobjective. Depending upon the outcome,the changes could be far reaching.

Institutions for OccupationalRetirement Provision (IORP)II Directive

This is currently being considered bythe European Parliament with theirreport due by the Autumn. Theindications are a that there could be adilution of some of the morecontroversial proposals, with a morehigh level principles based approachwhich has been welcomed by theNational Association of Pension Funds.The areas being considered include aholistic balance sheet, cross-borderrequirements and professionalqualifications for trustees. It will beimportant to keep these developmentsunder review.

Pensions Commissionand a Single Regulator

The creation of a single regulator andthe establishment of a PensionsCommission have been mooted butcomments made by Ros Altmann tothe Work and Pensions Committeesuggest these are not currentlypriorities for the government. Thesuccessful roll out of auto-enrolment,pension flexibilities and charges areconsidered to be most important.

With trustees having had to contendwith so many changes in recent years,they could be forgiven for wishing fora period of quiet reflection. However,the pace of change shows no sign ofslowing, with many issues to beconsidered ahead of April 2016 and insome cases beyond.

OPDU

Diary Dates 2016�

Annual Meeting: Thursday 28 January

17.00 - 20.00Venue: Reed Smith LLPThe Broadgate Tower

Primrose Street EC2A 2RS

�In accordance with OPDU’saims of helping to raisestandards of pensionmanagement and

administration, events arefree to attend and pleaseregister your interest at:

enquiries@opdu.com

There will be anannouncement shortlywith the full programme

and speakers.

Membership TipsContact details:

please advise of any changes incontact details including personneland office moves as soon as possible.

Trustee appointments:similarly, it is important we

maintain accurate records of currentor former trustees. This will ensurethey receive their membership UserCards and Handbooks which arepart of the benefits of OPDU andthat retired trustees have the benefitof lifetime cover. This applies alsoto named company pensionpersonnel who have the same

benefits of cover.

Claim notifications:please notify any circumstances thatmay give rise to a claim us as soon

as possible. We would alsoencourage the use of the OPDUAdvisory Service which providesgeneral guidance and advice onmatters affecting the day-to-dayadministration of the pensionscheme. Matters that are discussedwith the Advisory Service willdeem to have been notified if theysubsequently materialise as claims

which, in practice, can besometime later.

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OPDU

There is an increase in the number ofschemes winding up, and OPDU offersa separate Discontinuance Policy ofinsurance to cover trustees for theliabilities that can still arise followingcompletion of the wind up.

Even if a scheme or company has totallydischarged its future liabilities in relationto the pension scheme, a past trusteeremains personally liable, potentiallyfor their lifetime, for any acts theyundertook whilst in the role.The following is a brief summary ofthe cover provided. For further information pleasecontact enquiries@opdu.com

What is covered?

� OPDU Elite Discontinuance will pay the loss a past trustee or employee is legally obliged to pay as a result of a wrongful act in relation to the named pension scheme(s). � It provides cover for wrongful acts committed prior to the inception of the policy, from the date the scheme was first established � It will also pay all reasonable legal costs incurred in relation to an official or fact finding investigation by the Pensions Ombudsman, Pensions Regulator or other equivalent body.

Who is covered?

� Past trustees� Employees� A corporate trustee company� Lawful spouses, estates, heirs or legal representatives of past trustees or employees in the event of death, incapacity, insolvency or bankruptcy� Any other natural person or entity who acted as trustee as attached by specific written endorsement.

Who is included in thedefinition of trustee?

� Any natural person, including a director or officer of a corporate trustee company, who was appointed as a trustee.

Who is included in thedefinition of employee?

Any natural person who providedservices in relation to the pensionscheme whilst in the employment ofthe sponsoring employer company,corporate trustee company, trustee orpension scheme, including:

� Directors and officers� Committee and / or board members� Administrators� Pension scheme managers.

What is included in thedefinition of corporatetrustee company?

� Any company appointed to act as a trustee, regardless of whether that company was a subsidiary or not of the sponsoring employer company.

What constitutes a claim?

� A written demand alleging legal liability� A civil or arbitral proceeding� A criminal suit� An administrative or regulatory proceeding� An official investigation.

What wrongful acts arecovered?

OPDU Elite Discontinuance offersprotection against a comprehensiverange of allegations, including:

� Breaches of trust, duty and statutory provision� Negligence

� Administrative errors� Wrongful omissions� Misstatements� Misleading statements� Maladministration� Financial loss resulting from damage, loss or destruction of pension scheme documents.

What is included in thedefinition of loss?

� Damages� Judgments� Settlements� Awards (including distress awards or compensation as determined by the Pensions Ombudsman)� Defence costs� Costs for legal representation in relation to an official or fact finding investigation instigated during the policy period (i.e. where there is no requirement for an allegation of a wrongful act) by the Pensions Ombudsman, Pensions Regulator or other equivalent body.

What is included in defencecosts?

� All reasonable third-party fees, costs and expenses that are incurred to defend or appeal a claim. � Provision for full advancement of defence costs, where required.

Additional features ofElite Discontinuance

� Limits of liability to £10m and higher if required� Policy periods ranging from one year to lifetime are available� Optional extensions are available to provide cover for:� Civil fines and penalties (where insurable and the premium is not being paid for out of the scheme assets); and� Member nominated trustees in the event of innocent non- disclosure or misrepresentation.

Insurance for schemeswinding up

OPDU Elite Discontinuance is underwrittenby ACE European Group Limited.

Many trustees do not consider pensiontrustee liability insurance until a schemeis being closed and it is apparent that thesponsoring employer might no longer bein existence in the future. This can leavethe trustees vulnerable to claims and it issensible to obtain insurance cover earlywhen the scheme is on-going which thenprovides full protection and also makes iteasier to have continuity of cover withrun-off insurance when the scheme iswound up.

With the continued growth in definedcontribution (DC) schemes, it isimportant to recognise that the trusteesof such schemes face different legal risksand exposures from those of definedbenefit schemes. DC trustees haveultimate responsibility for the accuracyof statements, market valuations andincreasingly important, the selection andmonitoring of investment vehiclesoffered. These factors increase the riskfor claims occurring which has beenborne out by claims experience.

Data for DC is usually better than DBbecause the Schemes are generally morerecent. The problem is that if it's wrong,the ramifications are usually far worsebecause of monthly allocations ofcontributions at changing unit prices.If there's a systemic issue then it can beapplied across a large number ofmembers.

Ensuring members have theinformation they need to makeinformed choices is increasingly onerouswith the new options and thereforethere is an obvious potential comebackon the trustees. This applies to bothinvestment choices and decisions whentaking benefits and effective accuratecommunication is paramount. Who isgoing to deliver this and how? Trusteeswill need to ensure that members areled to the guidance being provided byPension Wise but this alone may not beconsidered sufficient.

There may also be potential problemsinvolving scams for which the trusteescould have responsibility if they paymoney to an inappropriate vehicle.

Why do we need insurancewhen we have an indemnityand an exoneration clause toprotect us against claims?

An indemnity may be given by thescheme or the sponsoring employercompany and many trustees will havethe benefit of exoneration clauseswithin the trust deed and rulesexcluding them from liability. However,it is not always appreciated that suchclauses are subject to statutory limits.For example, an exoneration orindemnity from the fund cannot operatefor any breach of trust relating toinvestments and it is also prohibited forthe scheme to indemnify trustees forcivil fines and penalties. It should also beappreciated that an indemnity from theemployer would be of no value upon aninsolvency when the trustees are stillhaving to manage the scheme.

Insurance provides an external sourceof protection and should stand in frontof such indemnity clauses. In today’senvironment, trustees do not usuallywish to “hide” behind exonerationclauses when facing valid claims frompension scheme members.

Are we covered for past actionsthat were taken before the datethat we take out insurance?

Trustee liability insurance operates ona “claims made” basis which means thatthere is potentially cover for claimsmade against the insured during thepolicy period irrespective of when theevent giving rise to the claim occurred.

What is the position whena trustee retires – are theystill covered?

A trustee’s personal exposure does notcease when they retire and their postretirement situation may make themparticularly vulnerable. Problems in

pensions often take a considerable timeafter the event to materialise. It isimportant, therefore, to check that theposition of retired trustees and pensionmanagers is properly protected. Thesolution is for retired trustees andcompany pension personnel to have theguarantee of cover in the event that thescheme ceases to be insured. They canthen rest assured that they have coverpersonal to them, irrespective of whatthe employer or trustees have done, ornot done, about insurance since theyretired. It is again important to check theextent of cover provided in this respectas policies do vary (OPDU Eliteprovides lifetime cover from the date ofexpiry of the main policy of insurancethus giving valuable peace of mind).However, if the main policy of insuranceis renewed each year then the cover forretired trustees should remain in place.

Have claims been madeagainst trustees?

OPDU’s own claims experience hasseen issues which have involvedindividual claims sums of up to £20mto date. One common feature is, asone would anticipate, the importance ofthe accuracy of data and we encouragetrustees therefore to ensure that regulardata healthchecks are undertaken. Otherissues which have given rise to problemsand potential liabilities include:incorrect formulas used for calculatingbenefits; interpretation of Trust Deeds;overpayment of benefits; misapplicationof Scheme Rules; seeking courtdirections; early retirement & ill-healthdisputes; rectification proceedings,accounting irregularities; DC choicesof investment funds; Pension SharingOrders; general administration errors;TUPE issues; misrepresentations bytrustees; transfer values; incorrectquotations; discrepancies betweenscheme documentation andadministration practice; delays in transferand payments of benefit assets; and PPFlevy issues.

OPDU

Trustee protectionThe right insurance policy can minimise concerns about potential future liabilities

Some frequently asked questions

OPDU Report 33 1514 OPDU Report 33

OPDU

Who is covered?� Past, present and future trustees and employees� A corporate trustee company� The sponsoring employer company� The pension scheme� Lawful spouses, domestic and civil partners, estates, heirs or legal representatives of trustees or employees in the event of death, incapacity, insolvency or bankruptcy� Any other natural person or entity acting as trustee as attached by specific written endorsement.

Who is included in thedefinition of trustee?� Any natural person, including a director or officer of a corporate trustee company, who is or has been appointed as a trustee, including a constructive trustee� The Policy also allows for any other natural person or entity, including a director or officer of that entity, to be specifically included by written endorsement.

Who is included in thedefinition of employee?Any person providing services to thepension scheme whilst in the employ-ment of the sponsoring employercompany, the corporate trustee company,or the pension scheme, including:� Directors and officers� Committee and/or Board members� Administrators� Pension scheme managers� Internal dispute managers.

What constitutes a claim?� A written demand alleging a wrongful act (or, if no claim is being brought, the Trustee must become aware of the Wrongful Act during the policy period and must have been advised that a claim could be brought)� A civil, ombudsman, arbitral proceeding or mediation� A criminal prosecution� An administrative or regulatory proceeding� An official investigation� A contribution notice as issued by

the Pensions Regulator under the Pensions Act 2004� An extradition proceeding.

What is covered?The Policy will pay for loss resultingfrom a wrongful act, specifically onbehalf of:� The trustees or employees for loss which they are legally obligated to pay� The sponsoring employer company or pension scheme for all loss resulting from indemnification� The pension scheme for all loss which has been suffered as a result of exoneration� The sponsoring employer company or corporate trustee company for all loss that they are legally obligated to pay.

What wrongful acts arecovered?The Policy offers protection against acomprehensive range of allegations,including:� Breach of trust, duty or statutory provision� Negligence� Administrative errors� Wrongful omissions� Misstatements� Misleading statements� Maladministration� Financial loss resulting from damage, loss or destruction of pension scheme documents.

What is included in thedefinition of loss?� Damages� Judgments� Settlements� Awards (including distress awards or compensation as determined by the various pension regulatory bodies)� Defence costs� Costs (up to a specified sub-limit) incurred in relation to a fact-finding investigation or proceeding (i.e. where there is not requirement for an allegation of a wrongful act) by the various pension regulatory bodies� Costs (up to a specified sub-limit) for expenses incurred in taking

action to prevent, limit or mitigate exposure to an actual or potential claim.

What is included indefence costs?� All reasonable fees, costs and expenses that are incurred to defend or appeal a claim� Provision for full advancement of defence costs� Option to include the provision to incur emergency defence costs if required

Additional features ofthe Policy:� The policy cannot be cancelled without the insured parties’ agreement (other than in the case of non-payment of premium)� A discovery period of 12 months is available should either the insurer or insured parties refuse to renew this policy� Ability to apply different retention amounts depending on whether the deductible is to be paid by the sponsoring employer company or the pension scheme itself� No deductible applies where exoneration has been granted or the loss is the personal liability of a trustee or employee� Overall authority for the policy can be granted to either the sponsoring employer company or to the trustee(s), who then agree to act on behalf of each and every other insured party

The Policy also respondsto a number of changingcircumstances:� Continuous cover for the remainder of the policy period in the event that the sponsoring employer company:� merges with or consolidates into another entity (any subsequent name changes to the sponsoring employer company and or pension scheme must be advised)� enters administration� commences wind-up of a pension scheme

Guide to Policy WordingPension Trustee Liability Insurance

� Automatic cover is granted for a new or additional pension scheme whose total assets are 10% or less of the combined total assets being covered (subject to endorsement). Schemes in excess of this have cover for a period of 60 days, after which cover must be specifically agreed by the insurer� Where a scheme has been wound up cover shall include those who were insured, or would have been insured, at the time for wrongful acts committed prior to the date of such cessation, with the potential to provide an extended period of cover of up to 15 years

Extensions included:� Civil fines and penalties, where insurable� Retirement cover: lifetime for named “Users” - During a pension scheme’s membership of OPDU, all retired trustees and administrators remain covered. If a pension scheme leaves membership, retired trustees and retired named administrators have insurance cover for their lifetime should no alternative cover already be provided. This gives individuals valuable peace of mind in their retirement when they no longer have any say in whether their pension fund should purchase insurance cover� Costs (sub-limit £1m) incurred in relation to a fact-finding investigation or proceeding (i.e. where there is no requirement for an allegation of a wrongful act) by the various pension regulatory bodies� Brand damage and reputation protection (sub-limit £100,000)� Cover for extradition proceedings� Prosecution costs� Emergency costs provision (sub limit £100,000) where urgency dictates that OPDU or insurer’s consent for incurring costs cannot be obtained� Employee benefit programmes and/or employee share ownership programmes� Costs incurred in replacing or restoring pension scheme documents

in the event of their loss, damage or destruction (sublimit £100,000)� Theft of pension scheme assets

Optional Extensionsinclude:� Court Application Costs (sub-limit as specified on request) - Sometimes issues arise where the trustees are advised to seek directions or a declaration from the court as to future conduct of matters or the interpretation of trust documents. Normally several interests have to be represented by separate lawyers and all parties costs have to be met out of the pension scheme’s assets. � Third Party Service Provider Pursuit cover for the purpose of establishing a breach of professional duty of care (sublimit £100,000).� Each and Every Claim – This cover will convert the aggregate limit of liability under the policy to an Each and Every Claim basis.

Key Policy Exclusions:� Fraud or dishonesty or intentional breach of law - Where established by judgment or other final adjudic ation or by formal written admission� Personal profit or advantage� Pollution - However defence costs included up to £1m for a claim brought� Direct bodily injury or property damage� Failure to fund / procure funds / collect contributions (save where this is a Wrongful Act of the Trustee)� North American litigation. However, with OPDU’s agreement, the exclusion shall not apply to North American litigation in respect of Wrongful Acts of the Insured undertaken outside the U.S. or Canada in respect of the Scheme which are governed exclusively by English Law.

OPDU ServicesThe Advisory ServiceProvides trustees and administratorswith general guidance and advice onmatters affecting the day-to-day admin-istration of the pension fund. It aims tofacilitate good governance. Theconfidential advice line is staffed bylawyers and pension professionals andprovides access to The Advisory Panelexperts where appropriate.

The Advisory Service is complementaryto the services provided by members’existing professional advisers.

The Claims ServiceProvides the best possible claimshandling service through a team of in-house barristers, solicitors and pensionprofessionals who deal with claims insympathetic and professional manner.They are experienced in managingcomplex, sensitive disputes with dueregard to the adverse publicity thatlitigation can attract.

Trustee Risk ManagementProvides a risk-based approach enablingtrustees to focus on the key risksrequiring appropriate internal controlsto comply with the latest legislationand regulation. Topical one-dayseminars are held in conjunction withACE European Group, The PensionsRegulator and other leading pensionpractitioners. TRM was established toachieve OPDU’s aim of promotinggood governance. Its services areavailable to all pension funds regardlessof whether they are members of OPDU.

Other facilities:OPDU can provide access to a numberof other insurance facilities, forexample: winding-up insurance; crimeand fidelity insurance; cover for trusteesfollowing mergers, buy-out andprotection against costs risks inherent inpursuing claims for damages againstthird parties such as fund managers andother service providers. If you havenovel insurance requirements we canwork with you to seek to develop apolicy to meet your needs.

OPDU

OPDU Report 33 1716 OPDU Report 33

OPDU - Each and every claim cover

To date the limit of coverhas been aggregate.This means that theinsurer’s exposure iscapped at the limit ofcover no matter howmany claims are madeagainst the member.So, for example, if amember had £10m ofcover and notified aclaim which cost £9mto resolve, the memberwould be left with£1m of cover torespond to any otherclaims notified duringthe same policy period.

Responding totrustees’ concerns

Concern was expressed by sometrustees at presentations made byOPDU to trustee boards that wheremore than one scheme was insuredunder the same OPDU policy a claimby the trustees of one scheme coulderode the cover available to indemnifythe trustees of another scheme. Oneresponse to this was to arrange separatecover for each scheme, but this couldprove costly. Ever looking to beinnovative OPDU persuaded its leadunderwriter, ACE, to provide theoption to cover on an each and everyclaim basis. Excess layer insurers havefollowed suit.

Each and every claimcover

Each and every claim cover is radicallydifferent to aggregate cover becausethe full limit of cover is available toindemnify each and every claim madeon the policy, provided the claims arenot related to each other.

So taking the example above, if anotified claim costs £9m to resolve, amember with each and every claimcover would have the full £10m limitof cover available to indemnifyanother unrelated claim on the policy.The number of claims which can beindemnified in any policy periodis unlimited.

A cost-effectiveoption

This substantial increase in cover istypically available for a 15% increase inpremium. Some members who haveput in place separate insurance for eachof their schemes have indeed been ableto reduce the cost of their cover byreplacing multiple policies with a singlepolicy covering all schemes on the eachand every claim basis.

OPDU is already experiencing strongdemand for this cost-effective optionand will continue to look for ways toimprove the protection afforded to itsmembers.

Increased peace of mindOPDU has secured a big increase in the cover available to members

OPDU

PPF Levy

The issueThe risk-based element of the PPF levyis calculated by use of failure scoresapplied by ratings agencies when calcu-lating the probability of insolvency inthe next twelve months of an employer:the higher the risk of insolvency thehigher the risk- based levy.

What happened?When a ratings agency determined‘A’s’ failure score it did not take intoaccount the latest filed accounts. Thisresulted in the insolvency risk beingoverstated and ‘A’ was presented witha levy demand almost 30 times higherthan was anticipated.

‘A’ successfully appealed to the PPFOmbudsman who determined thefailure score was unfair as it was basedon out of date information. However,this decision was overturned on appealto the High Court which ruled that thePPF’s decision was sound as it wasbased on correct information providedto the ratings agency at the time.

The outcomeThe ruling required ‘A’ to pay the costsof the litigation in addition to theoriginal levy demand.

How the OPDU/ACE Elitepolicy respondedWith the benefit of the OPDU/ACEElite policy, ‘A’ was indemnified for theexpensive litigation costs and also forthe enhanced cost of the levy*.

Maladministration –Investment Losses

The issueMaladministration is a “catch-all”expression for poor or impropermanagement. Pensions managers areusually effective and efficient and lessprone to accusations of maladmini-stration than many others. But they arenot immune from aberration!

What happened?‘A’ decided to wind up a DefinedContribution (“DC”) scheme ofa newly acquired business. Schememembers were sent an OptionForm to indicate they wished to join

A’s DC scheme and also an InvestmentChoice form to determine their levelof investment risk. The majority ofscheme members returned the OptionForm indicating a wish to transfer allaccrued benefits to the principalemployer’s DC scheme. ‘A’ decided toplace any transferred funds into a cashaccount until each scheme member hadindicated their investment choice.

The problem was that the majority ofscheme members had completed andreturned the Investment Choice formstogether with the Option Forms but theforms were not separated and instead ofsending the Investment Choice forms tothe administrators they were mistakenlyfiled and thus members’ funds were notinvested as directed.

The outcomeIn the four years that had passed untilthe error was spotted, equities had risensharply and the loss to membersapproached £500,000.

How the OPDU/ACE Elitepolicy responded‘A’ was able to call upon its policy withOPDU which covered the loss*.

Claims - case studies

*subject to policy excess

OPDU Report 33 1918 OPDU Report 33

OPDU Report 33 2120 OPDU Report 33

The Association of Member NominatedTrustees is celebrating five years inexistence since it was set up back in2010. When we started, we were adozen people who shared the view thatan organisation was needed to bringMember Nominated Trustees (MNTs)together, help them gain knowledge,understanding and confidence, and givethem a voice.

Five years on we now have amembership of more than 500 trusteesfrom pension schemes with collectiveassets of over half a trillion pounds.

During that time we have worked withthe Pensions Regulator to improve theTrustee Toolkit and run many sessionswith our members to study modules ofthe Toolkit. We have enabled membersto successfully sit the PensionsManagement Institute’s Award inPensions Trusteeship, giving themrecognised qualifications.

We have taken up members’ concernsand achieved real change for the better.Our lobbying of government resulted inchanges to the Regulator’s handling ofDB scheme triennial valuations(remember the 10-year trigger that is nomore?); our campaign against marketvalue accounting, which has devastatedDB schemes, led to the Regulator being

given an additional statutory objectiveto minimise any adverse impact on thesustainable growth of an employer. Weworked with other like-mindedorganisations to persuade the DWP tochange its view of Collective DefinedContribution pensions, changing thelaw so that they are now permitted inthe UK.

We regularly ask our members theiropinions of Government and Regulatorconsultations and send in the AMNTresponse. We are invited to represent ourmembers at national and, increasingly,international conferences and meetingswhere the trustee voice needs to beheard.

And for the last two years we have beenworking on a new initiative, the mostsubstantial we have ever undertaken. Itresponds to a clear demand fromtrustees: to play their full part in theresponsible investment of their assets,adopting policies coveringenvironmental, social and corporategovernance.

But a major obstacle to most pensionschemes being active responsibleinvestors is the reluctance of fundmanagers to allow investors in pooledfunds to direct how the votes associatedwith our investments should be cast.They argue that conflicting instructionsfrom multiple investors would be toocomplicated to handle.

So we will soon be introducing a newapproach to asset owner voting on theUK market: Red Line Voting. Our RedLines are a series of tightly drawn,binary, voting instructions. Pensionschemes adopt some or all of thepolicies as they wish, and then instructtheir fund managers to engage and voteaccordingly. The fund managers are atliberty to vote contrary to a Red Line ifin their judgement that is theappropriate course of action, but if theydo they are required to explain to thepension scheme why they did so.

With Red Line Voting fund managersmay receive dozens of instructions fromclients, but they are all the sameinstructions, from the same menu as itwere, so this makes it easy for the fundmanager to allocate the votes pro rata.

We formulated the Red Lines oncorporate governance based on theconsensus we found among some of thelargest UK pension schemes and thesein turn are in furtherance of the UKCorporate Governance Code issued bythe Financial Reporting Council.

But there is no UK code governingsocial or environmental matters. Sofollowing the advice of some of theUK’s top fund managers on responsibleinvestment, we based our social andenvironmental Red Lines on the UnitedNations Global Compact (UNGC).The UNGC sets out all the main issuesthat a social and environmental policyshould cover and we are confident thatwe have done so. We developed theenvironmental Red Lines in closecooperation with a range of keystakeholders.

Having worked in partnership with theUK Sustainable Investment and FinanceAssociation for over a year, we areconfident that what we now have is theUK’s first off-the-shelf, ready-made,easy-to-adopt environmental and socialpolicy that any pension scheme canadopt. Any pension scheme interested inadopting Red Line Voting shouldcontact info@amnt.org

So AMNT is going from strength tostrength, and we would like to thank ourfriends at OPDU for their constant andkind support over the last five years. Wehave been overwhelmed by the supportand goodwill that we have had from somany pensions industry companies andwe look forward to achieving newheights in the years to come.

Janice TurnerFounding Co-Chair, AMNT

AMNT NEWS

News from the Association ofMember Nominated Trustees

Janice Turner, AMNT

OPDU protects pension schemes by providinga unique combination of risk management andcomprehensive insurance cover to trustees,administrators and sponsoring employers.

OPDU’s insured members can readily purchaselimits of cover between £1m and £50m orhigher limits can be arranged if required.The cover has been developed for the specialinsurance needs of pension schemes but canbe varied to meet the specific requirements ofindividual schemes.

OPDU affords a valuable external resourcefor reimbursing losses suffered by pensionschemes. The asset protection thereby givenis ultimately of benefit to pension schememembers.

OPDU is managed by Thomas Miller, theworld’s leading independent manager ofmutual insurance companies. OPDU Elite isunderwritten by ACE European Group Limited.The ACE Group of Companies is a globalleader in insurance and reinsurance.

Court Application Costs cover is available togive increased protection to pension schemeassets. The cover is able to pay the legal costsand expenses incurred by trustees or orderedto be paid out of the pension scheme in seekinga declaration or directions from the court.

OPDU Elite cover to:� Trustees� Corporate trustees� Directors of corporate trustees� Sponsoring employers � The pension scheme� Internal administrators � Internal advisers � Internal dispute managers

OPDU Elite cover for:� Ombudsman complaints� Defence costs� Employer indemnities� Exonerated losses� Litigation costs� Investigatory costs� Data risks� Mitigation of potential claims� Prosecution costs� Errors and omissions� TPR civil fines & penalties� Minimising risk to reputation � Extradition proceedings� Retirement cover - lifetime� Third party service provider pursuit costs � Court Application Costs

� Discontinuance insurance for schemes in wind-up

Advisory Service:� Problem solving� Guidance on minimising liabilities� Personal representation�Working with your own advisers

For the full details please contact OPDU:020 7204 2400 enquiries@opdu.com www.opdu.com

THE OCCUPATIONAL PENSIONS DEFENCE UNION LIMITED90 Fenchurch Street London EC3M 4ST

OPDUIS MANAGEDBY THOMASMILLER

The PensionsInsurance Specialist:Protecting Trustees, Schemes, Members & Employers

OPDU

NEWS FROM THE PENSIONS ARCHIVE

This year sees the 10thanniversary of theformation of The PensionsArchive Trust (PAT) whichwas launched by the lateAlastair Ross Goobeywhen he gave theinaugural Ross Goobeylecture at the CassBusiness School on27 October 2005. Much has happenedsince then, not least theestablishment in 2007of our invaluablepartnership with theLondon MetropolitanArchives (LMA), andthen obtaining charitablestatus a year later.

We are most grateful for the supportwe have received from many sources,both financial, to enable us to pay ourway, and by the generosity of numerousdonors of archival materials. We areproud to be gathering a growing anddiverse collection, and are well on theway towards achieving our primeobjective of preserving pensions historyfor the future.

To mark this occasion, on the eveningof Tuesday 3rd November, we areholding a special event in theAuditorium at the offices of Sacker &Partners LLP on 6th Floor, 20 GreshamStreet who are very kindly hosting andsponsoring it. It will reflect, in a spiritof optimism, the role of the PensionsArchive both as a custodian of the past,and of the changing face of pensionsfor the future. Our President, MichaelPomery, will introduce the evening’sprogramme.

Dr Yally Avrahampour will then openby:� drawing on pensions history, with our major collection of the papers of investment doyen the late George Ross Goobey, as the catalyst; � beginning to bridge the gap between pensions past to pensions today.

Alan Higham will follow by:� completing the story of pensions to the present day;� focusing on current developments in pensions – new ideas for new circumstances

and the evening will conclude with areception. If you would like to receivemore details and an invitation send anemail to: events@sackers.com

Board appointmentsDuring the year the directors of PAThave been very pleased to welcomethree new directors to the Board;Jocelyn Blackwell, Jane Marshall andPeter Dawes.

Jocelyn Blackwell founded DunnettShaw in 1987, a managementconsultancy that specialised in advisingclients on pensions administrationprocesses, systems and outsourcing. Itwas one of the original funders of PAT.The business merged with HighamGroup in 2005 to form HighamDunnett Shaw which was sold toCapita in 2007. Jocelyn was alsofounder of the industry wide “RaisingStandards in Pensions Administration”(now PASA). She was the winner of the“First Woman in Finance Award” in2005. She is a Non-Executive Directorof Inside Pensions, a specialist firm thatprovides independent schemesecretarial services to trustee boards andalso of NOW:Pensions, theindependent multi employer trust.

Jane Marshall has been a pensionslawyer since 1981, joining Lovell White& King at a time where few firms andlawyers considered pensions law aspeciality. A founder member of theAPL, she has served on various industrybodies, including most recently theNAPF's legal panel. She was part of theNAPF team which gave evidence onpensions and divorce to a House ofCommons Select Committee.

She was the managing partner ofboutique pensions law firm EllisonWesthorp and negotiated its mergerwith national firm Hammond Suddards(now Squire Sanders). She headed its 40plus team of pension lawyers and wasresponsible for some of its biggestclients. Jane has contributed to andedited a number of books on pensionslaw, including Pensions: the New Law(Jordans 1995) and The Pensions Act2004 (The Law Society). Havingretired as a partner of Macfarlanes LLPshe now runs her own consulting firmwhich focuses on risk, governance andthe promotion of closer workingrelationships between trustees andsponsors.

Peter Dawes, after graduating in law,became the first company secretarytrainee at British Aircraft Corporation

PAT’s 10th Anniversary

and was quickly involved withpensions. Over the next 10 year, hespent time as Secretary of the BACPension Scheme and subsequently, ofthe British Aerospace Pension Scheme.

Whilst his mainstream career has beenas company secretary of listedcompanies, he has almost always beenresponsible for pension arrangements inhis employing company. His last fulltime position was as Secretary of VosperThornycroft (later VT Group plc) andin this capacity he was also a trustee ofthe LAWDCs Pension Scheme and theShipbuilding Industries PensionScheme: for the latter, over a period often years he rotated as Chairman ofTrustees and Chairman of theInvestment Committee.

Peter is currently Chairman of Trusteesof the Wärtsilä Hamworthy PensionScheme and a trustee of the RoyalAlfred Seafarers Staff Pension Fund.He has been a Fellow of the Instituteof Chartered Secretaries andAdministrators since 1982 and is aLiveryman of their associated LiveryCompany.

InternsPAT has been very pleased to continueits financial support of the LMA’sintern scheme which assists youngpeople develop careers in ArchiveAdministration Joe Williams completedhis year’s internship with LMA/PAT inAugust. We thank him for hiscontribution to PAT’s work andespecially his efforts in completing thecataloguing of the extended RossGoobey collection (see below). He hasbeen successful in obtaining a place onthe one year University CollegeLondon - Archives and RecordsManagement professionalDiploma/MA course. We wish himwell on the course and in his futurecareer. Joe’s successor is Rachel Colewho will be joining the team on 12October for a twelve month internship.She will be coming from a year-longpost at the Peterborough Archives as a

trainee of the Transforming Archivesscheme run by the National Archives.

George Henry Ross GoobeycollectionPAT is delighted to announce thatsignificant additional records to theGeorge Henry Ross Goobey collectionhave now been catalogued. The papersconsist of transcripts of speeches, draftand final copies of articles, handwrittennotes, correspondence and details of hisinvolvement with an extensive range ofgroups and organisations. Thecollection has been given the referenceLMA/4481.

Ross Goobey joined the ImperialGroup Pension Fund as pensionsmanager in 1947, following a trainingas investment manager at Marine &General Insurance company andqualification as an actuary. As thepension manager of Imperial Tobacco,Ross Goobey invested the entiretyof the Imperial Tobacco pension fundin equities in the mid-1950s andadvocated equity investment as anappropriate policy for pension funds.His central role in the widespread shiftby pension funds from investingpredominantly in fixed income toinvesting in equities, known as the'cult of equity', makes him one of themost influential investors in the UK.

The newly catalogued material showsthe breadth of George Ross Goobey’sprofessional and personal interests.The date range for the collection is1905-1999; the start date being thatof an early pension scheme includedwithin his records for Christ’s Hospital.Ross Goobey’s charitable interests arewell represented in the collection inboth a personal capacity as subscriberand supporter and professionally interms of investment advice offeredduring his working life and inretirement.

Integrated into the George Henry RossGoobey collection (LMA/4481) is aselection of papers which can beviewed digitally. The scans, along with

comment papers on George RossGoobey's work, and a transcript of RossGoobey's address to the 1956Conference of the Association ofSuperannuation and Pension Funds canbe accessed on the George RossGoobey page of the website. For anygeneral enquiries about access to LMA,please contact the LMA Enquiries Teamat ask.lma@cityoflondon.gov.uk

Friends of PATWe want to encourage those whowork in pensions to regard thePensions Archive very much as theirarchive which records the part theyand their predecessors have playedin developing pension provision inthe UK. Subscriptions or donationsfrom individuals who wish tosupport the Trust’s work bybecoming a Friend of PAT are verywelcome. The Trust can claim GiftAid on donations from individualswho pay Income Tax and/orCapital Gains Tax in the UK. Forenquiries about Friends of PAT,contact Malcolm Deering: malcolm.deering@btinternet.comFor all other questions about PATdo contact me:

Alan HerbertChairman, The Pensions Archive Trust01438 869198 alanherbert@btconnect.comwww.pensionsarchive.org.uk

NEWS FROM THE PENSIONS ARCHIVE

OPDU Report 33 2322 OPDU Report 33

Authorised & Regulated by The Financial Conduct Authority

OPDU

Members www.opdu.comA. Bilbrough & Co LtdAdas Holdings LtdAdmin Re UK LtdAggregate IndustriesAgility Logistics LtdAirbus Defence and Space LtdAlfred Bagnall & Sons LtdAmerican EmbassyAntalis McNaughton LtdAP Racing LtdARCO LtdArmstrong Group Pension SchemeAssa Abloy Entrance Systems LimitedASSA ABLOY LtdAssa Ltd Pension & Life Assurance SchemeAstraZeneca plcAtos IT Services UK LtdAutoneum Great Britain LtdAveva Solution LtdBAE SYSTEMS plcBALPABank of New York MellonBeaufort Trust Corporation Ltd/Independent Pension Trustee LtdBell & Clements LtdBG Group plcBhs LtdBic UK LimitedBirkett Stevens Colman Partnership LtdBJ Services Company Limited UK Pension Fund (DC)BluSky Pensions UK LtdBNP Paribas Leasing Solutions LtdBNP Paribas London BranchBNP Paribas Real Estate Advisory & Property Management UK LtdBovis Homes LtdBox Clever Trustees LtdBradford & Bingley PlcBrit Group Services LtdBritax Childcare Group LtdBritish Airways Holidays LtdBritish Airways plcBritish American Tobacco (Investments) LtdBritish Ceramic Research Ltd British Energy plcBritvic Soft Drinks LtdBuilding & Engineering Services AssociationCable & WirelessCamlab LtdCanada Life International LtdCanon (UK) LtdCarillion plcCarrs (Birmingham) Pension FundCatalent UK Swindon Zydis LtdCB Richard Ellis LtdCentrica plcCharter Central Services LtdChurch of ScotlandCN Group LtdCoats Holdings LtdContinental UK Group Holdings LtdCoventry Building Society

CrowdbnkDachser LtdDaily Mail & General Trust plcDamovo UK Pension PlanDownlands Liability Management LtdDr Martens Airwair Group LtdDu Bois Limited Retirement Benefits Scheme No.2East London Bus & Coach Company LtdEisai Europe LtdElectricity Pension Services LtdEnergy InstituteEPC United Kingdom plcEuler Hermes UKEvonik Degussa UK Holdings LtdFive Arrows Limited and Associated Companies Pension SchemeFives Landis LimitedFives Stein LtdFKI LtdFormer Registered Dock Workers Pension FundFurness Withy (Chartering) LtdGamleys Limited Pension and Life Assurance SchemeGartmore Investment Management LtdGlass’s Information Services LtdGMBGNB Industrial Power (UK) LtdGuinness Peat Group plcHallmark Industries Pension Schemehibu (UK) LtdHiscox plcHMV Group plcHoneywell LtdHowden Compressors LtdHowden Group LtdHusqvarna UK LtdInchcape International Holdings LtdIntercontinental Hotels Group plcIPA Portable Pension PlanIsola Werke UK LtdJ Sainsbury plcJabil Circuit UK LtdJames Fisher & Sons plcJohn Laing plcKingfisher plcKing Sturge Retirement Benefits SchemeKLM Royal Dutch Airlines LtdLafarge TarmacLandmarc Support Services LtdLeathbond LimitedLegal & General Group UKPension and Assurance FundLegal & General Group UK Senior Pension SchemeLehman Brothers Pension SchemeLeyland Bus Trustees LtdLiberata Pension PlanLookers plcLummus Consultants International Ltd

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OPDU

Occupational PensionsDefence Union Limited90 Fenchurch StreetLondon EC3M 4STT +44 (0)20 7204 2400F +44 (0)20 7204 2477www.opdu.com

OPDUIS MANAGEDBY THOMASMILLER