How will the Pension Schemes Act affect indemnity cover?
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The pension schemes bill has become law. Among others, it introduces fines of up to £1m and up to seven years in jail for anyone involved in the running of a pension scheme. What does this mean for trustee cover?
The bill does not seem to be discussed with clients by insurance companies, but this could be an effect of the fact they do not plan to insure the fines themselves, rather than there not being a risk.
“The Pensions Schemes Bill hasn’t been raised by any of the insurers we have been speaking with recently in the context of Pensions Trustee Liability Insurance,” said Angus Duncan, executive director financial, executive and professional risks at Willis Towers Watson.
“As regards the new criminal offences proposed to be introduced, while policies might provide cover for defence costs in connection with such proceedings, the fines themselves would likely be uninsurable,” he explained.
Premiums for pension trustee liability have been reducing for the last 10 years, said Simon Taylor, executive director at digital insurance brokers Getindemnity.co.uk.
However, “with general increases across the board as a result of Covid-19, the implementation of Pension Schemes Act 2021 is bound to have a negative impact on renewal terms offered by insurers”, he believes.
He emphasised the importance of insurance cover for trustees, seeing a trend for regulators to be more proactive, saying that the “new legislation for fines and criminal sanctions should make trustees sit up and take note".
Are you planning to review your indemnity cover in light of the new sanctions?
