PTL Blog

Conflicts of Interest: How do you deal with them?

Posted by Richard Butcher on Mar 9, 2014, 3:30:00 PM

Conflicts of Interest arise in all aspects of life, however when you are a Trustee, it is imperative that there is a process in place to deal with them. What are they?

CoI

A Conflict of Interest can arise for Trustees in many different guises, and most commonly happens when a Trustee is also a beneficiary of the Scheme or a Director or even just an Employee of the sponsoring Employer. If you feel at any time that you have a conflict which is inhibiting an open discussion or feel that you can’t make a decision because of other interests you have – then it is vital that the Trustee Board have put in place procedures for dealing with this.

What do Trustees need to do?

You can’t easily get rid of a Conflict of Interest – and the Pensions Regulator doesn’t expect that. It does however expect you to have a system in place to identify, monitor and manage any Conflicts of Interest which may arise. There are 5 key principles that the Pensions Regulator expects all Trustees to comply with:-

1. Understand the Importance of Conflicts of Interest Trustees have to ensure they exercise independent judgement and are perceived by members to be doing so. This is an area fraught with complexity so it is important that Trustees understand when legal advice is needed to ensure all decisions are made as independently as possible.

2. Identify any Conflicts of Interest Trustees must ensure they identify any Conflicts of Interest that have already arisen and also which might arise in the future. These must then be communicated with the other Trustees to allow all parties to be able to discuss matters in an open manner. A register of all interests should be kept with all conflicts recorded in order to evidence full disclosure.

3. Evaluate, manage or avoid Conflicts Implement procedures that should be followed should conflicts arise, for example this may mean that the conflicted Trustee cannot participate in discussions or a vote, and even that an Independent Trustee should be appointed in order to ensure all decisions made are unbiased and not compromised in any way.

4. Manage adviser Conflicts: Trustees should seek clarification of any conflicts their advisers may have, for example where they also advise the sponsoring Employer. Trustees should be proactive in managing any conflicts identified, and put in place appropriate steps for dealing with these.

5. Put in place a Conflict of Interest Policy Agree formal procedures for dealing with Conflicts as and when they arise and fully document this after agreement with all Trustees. This policy should be kept under review and amended whenever needed. Training on this should be provided whenever it is necessary Summary Conflicts of Interest will always arise, but it is how you handle them that is important. While some of these can be dealt with internally, others can be so complex or important that outside help is vital.

 Download our Factsheet on "Conflicts of Interest"

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