Legal Practice Notes

The self-dealing rule The self-dealing rule is related to, yet separate from, the fair dealing rule and the genuine transaction rule. Authority suggests that, properly understood, these rules do not form part of a trustee’s duties or discretions; instead, they function as constraints that bar a trustee from acting in particular ways. This characterisation carries significant implications for the limitation of proceedings that beneficiaries may bring against trustees, influencing how claims can ultimately be pursued......

Practice Note This Practice Note is the first in a pair examining the data protection framework and how it affects trustees. Here, it considers the position under the Data Protection Act 1998 ( DPA 1998), the potentially competing trustee duties and principles, and the way courts have addressed them in recent decisions. Although the DPA 1998 was repealed by the Data Protection Act 2018 ( DPA 2018) with effect from 25 May 2018, the earlier regime continues to govern historic data breaches, subject access requests ( SARs) and other privacy-related claims arising from processing that occurred before 25 May 2018. Keeping sensitive information confidential has long been viewed as one of the attractions of trust arrangements. After Dawson‑ Damer v Taylor Wessing (which has been before the High Court, the Court of Appeal, and returned to both courts on remitted issues), it has become...

Appointment of original trustees Trustees must be expressly and clearly named within the trust deed. For instance: ‘ THIS SETTLEMENT is made the ....... day of ......... BETWEEN: (1) (settlor) of (address) (“the Settlor”) and (2) (original trustees) of (addresses) (“the Original Trustees”).’ Acceptance of office A trustee takes office upon accepting the role. Such acceptance may be express, for example by signing the trust instrument, or implied, for example by personally and directly dealing with trust property. Once in post, trustees occupy a fiduciary role and must act in good faith. The trustee’s duty is to administer the trust solely for the benefit of its beneficiaries. Who can act as trustee Any person, whether male or female, married or unmarried, or any human or corporate body, who is able to hold and dispose of any legal or equitable estate or interest in assets, may create a trust and serve as a...

This Practice Note has been archived and is not maintained. The Small Business, Enterprise and Employment Act 2015 ( SBEEA 2015) obtained Royal Assent on 26 March 2015, delivering a package of reforms and statutory clarifications designed to keep the UK recognised worldwide as a dependable, fair environment for commerce while creating fresh scope for small firms to innovate and compete. The Act introduced a range of company and insolvency measures to underpin a robust regulatory framework for those responsible for administering insolvencies. Within this Practice Note we address the provisions relevant to trustees in bankruptcy, located in SBEEA 2015, section 133 and Schedule 10. These provisions took effect on 6 April 2017 under the Small Business, Enterprise and Employment Act 2015 ( Commencement No 6 and Transitional and Savings Provisions) Regulations 2016, SI 2016/1020. SBEEA 2015 is supported by...

The Pensions Regulator ( TPR)’s General Code, in force from 28 March 2024, features a module titled ‘ Remuneration and fee policy’ that outlines TPR’s expectations for trustees when developing a remuneration and fee policy. While there is no statutory duty to create and keep such a policy, and the General Code itself has no force of law, TPR regards it as an essential component of establishing and operating an effective system of governance ( ESOG), as required by the Occupational Pension Schemes ( Governance) ( Amendment) Regulations 2018, SI 2018/1103. Accordingly, not having a remuneration and fee policy could be considered by a court or tribunal when assessing whether a scheme has met the ESOG requirement, unless the scheme can show it has taken an alternative route to satisfy that obligation. For further information on the status of the General Code, see...

Nature of powers A trustee’s authority can be grouped as follows: administrative, i.e. powers concerned with careful stewardship in fulfilling the trustee’s obligation to preserve the trust fund dispositive, i.e. powers designed to alter the benefits that beneficiaries are to receive (often called ‘distributive powers’) Powers might be wholly discretionary (such as bare powers of appointment seen in fixed or discretionary settlements), or they may take the form of a trust or duty (as with trust powers within discretionary trusts). A trustee is required to consider whether to invoke a purely discretionary power, yet cannot be forced to do so, even if leaving it unused advantages one beneficiary to the detriment of another. Where a power amounts to a trust or enforceable duty, its use can be compelled; however, the court will not substitute its judgment for the trustee’s regarding the timing and method of...

Save where exempt, pension scheme trustees—including directors of corporate trustees and, from 1 April 2015, members of the pension board of a public service pension scheme—have a statutory obligation to acquire and maintain an appropriate level of knowledge and understanding across specified pensions areas. This obligation is commonly abbreviated to TKU. The TKU framework The TKU duty is set out in: sections 247–249 of the Pensions Act 2004 ( Pe A 2004) the Occupational Pension Schemes ( Trustees' Knowledge and Understanding) Regulations 2006, SI 2006/686 (the TKU Regs) The Pensions Regulator ( TPR) has expanded on the duty in a range of guidance, including: the General Code of Practice guidance on scheme management skills for DC pensions trustee guidance entitled ‘ Understanding your role’ Which trustees are subject to the TKU duty? Subject to the exemption outlined below, trustees of all...

Commercial property Commercial property exists to deliver a financial return for the owner by being occupied or used by businesses. That return may arise as rent paid by tenants, or through growth in the asset’s capital value, realised on disposal of the property. Key contrasts between residential and commercial investment include: Costs — large, high‑quality commercial assets generally carry significantly higher price tags than residential property. Valuation — the distinctive nature of many commercial buildings means reliable valuation usually requires professional advice, while house prices are comparatively straightforward to compare. Commercial leases — these typically run for much longer than residential leases, often feature upward‑only rent reviews (so rent cannot fall at review), and place repair and maintenance duties on tenants. The decision to invest in commercial property Trustees may invest in commercial property either directly or indirectly. Indirect investment involves placing funds into a...

Sound administration underpins the smooth operation of a pension scheme and the delivery of good member outcomes, not least because administrators are typically members’ first port of call; consequently, their effectiveness, consistency and accuracy indeed strongly influence member experience and results. In short, administration counts because it is the usual locus of pension governance, safeguarding data accuracy, regulatory compliance and correct member outcomes being delivered on a consistent basis. What is a scheme administrator? For the purposes of this Practice Note, ‘scheme administrator’ means the individual or entity that supports the scheme’s day-to-day running by planning, managing and performing its administrative tasks. This can be an external provider, a dedicated internal team within the employer and/or the employer’s human resources or finance functions and departments. This usage is different from the ‘scheme administrator’ in Part 4 of the Finance Act 2004 ( FA 2004), denoting the person or...

When reaching decisions, trustees are expected, among other obligations, to: act in the best interests of scheme beneficiaries act for a proper purpose possess sufficient knowledge and understanding of pensions law consider all relevant factors and ignore those that are irrelevant In putting this principle into effect, trustees need to determine: what amounts to a relevant factor, and the extent to which the trustees can (or ought to) take that factor into account For further information on trustee duties, see Practice Note: Duties of pension trustees. These matters were considered by the High Court in Independent Trustee Services Ltd v Hope (the Ilford case), which explored the relevance of the Pension Protection Fund ( PPF) in trustees’ decision-making. The Ilford case—the facts Independent Trustee Services Ltd was the sole corporate trustee of the Ilford pension scheme, a defined benefit...

It is fairly common for trustees to encounter obstacles when administering trusts, sometimes of a difficult or technical kind. In such circumstances, they may seek the court’s guidance, and they are likewise entitled to the court’s protection while discharging their obligations under a trust. When a trustee invites the court to exercise its powers in a matter affecting the trust, the court’s sole focus is what best serves the trust’s interests; it is not chiefly preoccupied with the rights or positions of adversarial parties. Trustees who obtain a ruling from the court of first instance are safeguarded so long as they comply with what has been determined; however, if they pursue an appeal and are unsuccessful, they face an almost inevitable order to pay costs. A notable distinction arises when a trustee contemplates an application to the court. Where a...

THIS PRACTICE NOTE APPLIES IN RELATION TO OCCUPATIONAL PENSION SCHEMES At present, only trustees of “relevant schemes” — essentially defined contribution ( DC) occupational pension schemes — are obliged to appoint a chair. This obligation took effect on 6 April 2015 via the Occupational Pension Schemes ( Charges and Governance) Regulations 2015, SI 2015/879 (the Charges and Governance Regulations 2015), which added the requirement to the Occupational Pension Schemes ( Scheme Administration) Regulations 1996, SI 1996/1715, reg 22. This Practice Note centres on that obligation. From 6 April 2024, trustees of defined benefit ( DB) occupational pension schemes must also appoint a chair, who must report on the scheme’s funding and investment strategy to the Pensions Regulator ( TPR). This arises under the Pension Schemes Act 2021 ( PSA 2021) and supporting regulations. For more detail, see: Trustee chair requirement for DB schemes, below. PSA 2021...

THIS PRACTICE NOTE APPLIES TO REGISTERED OCCUPATIONAL PENSION SCHEMES Trustee reporting duties have grown markedly over the years, mainly owing to the establishment of the registered pension scheme framework and regime and the creation of the Pensions Regulator ( TPR), which depends, at least in part, on trustees’ both prompt and accurate reporting of scheme affairs and matters to fulfil its statutory objectives. The following are trustee reporting obligations. The duty to report notifiable events Within the notifiable events framework, trustees must comply with requirements set out in the following sources: sections 69–69A of the Pensions Act 2004 ( Pe A 2004), as amended the Pensions Regulator ( Notifiable Events) Regulations 2005, SI 2005/900 (the Notifiable Events Regulations) TPR’s notifiable events directions TPR’s General Code module on notifiable events TPR's code-related guidance on the notifiable events...

Introduction Many trusts hold shares as elements of a broader investment portfolio. This Practice Note considers circumstances and examples where trustees possess shares to further another commercial objective. Such trusts fall into two principal types or categories: where the goal is to consolidate management and, potentially, voting powers in the shares while preserving the beneficiaries’ economic entitlements. These arrangements will typically be bare trusts, and trusts designed to retain shares so as to confer benefits on beneficiaries at a later point in time and possibly on a discretionary footing. Such trusts will generally be settlements for tax purposes Voting trusts A voting trust is frequently paired with a shareholders’ agreement, so the structure is part trust and part contract. The trust/contract may operate in a variety of different ways. For example, in Booth v Ellard, a group of family members settled their shares in the...

Trust litigation is commonly divided into three distinct forms: a disagreement concerning the trusts upon which trustees are said to hold the subject matter of the trust a disagreement with one or more beneficiaries about the propriety of any step the trustees have taken, omitted to take, or may or may not take in the future a disagreement with persons, otherwise than in their capacity as beneficiaries, regarding rights and liabilities assumed by the trustees as such in the course of administering the trust The first type may be amicable, in that the court’s assistance is sought to settle the construction of an instrument; equally, it can be hostile, for example where the validity of the trust itself is impugned. The dividing line between a friendly and a hostile matter can be hard to draw. The second type is the more recognisable beneficiary dispute, such as where a breach of...

Powers to invest Trustees’ authority to run a trust is grounded in statute—chiefly the Trustee Act 1925 and the Trustee Act 2000 ( Tr A 2000)—and is augmented by the trust instrument’s terms. It is common for trust deeds to confer express, extended investment powers, giving trustees greater freedom over how funds are invested and, historically, to bypass the onerous administrative rules of the Trustee Investments Act 1961 (substantially repealed by Tr A 2000). The statutory investment powers are contained in Tr A 2000, s 3 (widely referred to as the general power of investment) and operate in addition to any powers granted by the trust instrument, but remain subject to any restriction or exclusion the instrument imposes ( Tr A 2000, s 6). The general power of investment applies to trusts and Will trusts created both before and after Tr A 2000...

One cannot pursue a breach of trust claim or seek an administration order concerning a trust unless its existence is proven. Conversely, from a prospective defendant’s perspective, showing that no trust exists will release them from liability. Establishment A settlor may create a trust in one of two ways: by declaring that they, acting as trustees, hold specified property absolutely for another; or by transferring assets to independent trustees on the basis that they will hold the property for specific individuals Whichever route is taken, the declaration must be irrevocable and the trust must be fully constituted. In practical terms, once the settlor has done everything necessary to effect the transfer of the property, the settlement becomes irrevocable. The question is whether anything remains to be done by the settlor, and not by the beneficiaries or the trustees. A basic formulation of the key...

Common misconceptions There are several recurring misconceptions about the standard opening wording used in trust deeds, for example, that practitioners frequently encounter in practice and in correspondence: it is not required for the trustees to be parties to the deed of trust—the principal benefit of naming them is that, by signing the deed, they accept the office of trustee and acquaint themselves with the trust’s terms (note that, once the office is accepted, it cannot be disclaimed, although a trustee may retire) although it is preferable to include a date, the absence of one does not undermine the trust’s validity—a trust only takes effect (regardless of any date inserted) when the trustees are holding property in line with its terms offshore trusts can involve a protector, whose appointment is intended to enable a measure of oversight in relation to overseas trustees; the protector may (but need not) be a...

Gathering information from the client On receiving instructions, it is advisable to have the client complete a statement of assets and liabilities. This then allows consideration of the amount to settle into trust, which items should be placed into the trust, or whether to set up a trust at all, instead of gifting outright or keeping the assets......

What is a trust corporation Many law practices operate a trust corporation to perform fiduciary duties, including appointment as executor, administrator, trustee, attorney or deputy. This corporation is a distinct legal entity capable of holding assets. Trust corporations are widely regarded as the most appropriate vehicle to provide continuity and flexibility, since a corporate trustee does not retire, die or become ill as firm partners ultimately might. This model therefore promotes stable administration across matters and over time, whilst preserving consistent decision-making by a single, enduring officeholder within the firm's entity structure. Resorting to a trust corporation can also trim costs, because there is less, for example, need to manage the not infrequent appointment and retirement of trustees where they are natural persons. The compliance obligations on trustees are now significant, and deploying a trust corporation can relieve the...