- Set up a process that you can use to identify, monitor and manage conflicts of interest of trustees, advisers and service providers.
- Make sure the process includes a conflicts policy, register of interest, a system for declarations and advance planning.
Setting up a conflicts process
You must have a process that enables you to identify, monitor and manage any conflicts of interest, including potential conflicts, for those involved in running your defined benefit (DB) scheme. This includes trustees, advisers and service providers. Your process should include the following controls:
- agreeing a conflicts policy setting out your approach to dealing with conflicts – this should cover the process to identify and monitor conflicts and outline options for managing these
- register of interests for recording all actual or potential conflicts
- declarations when trustees, advisers and service providers are appointed, ongoing declarations by advisers and service providers as soon as they arise, and declarations at the start of trustee and sub-committee meetings
- advance planning to identify conflicts that may occur in the future and available options for managing these.
Trustee conflicts of interest
You need to understand when actual or potential conflicts of interest may arise for trustees of DB schemes. They may arise, for example, when you’re involved in funding negotiations.
Where there are acute or pervasive conflicts or tensions associated with a trustee’s role, eg where they are also the finance director of the employer and/or its parent company, it’s likely to be inappropriate for them to continue to be involved in those negotiations.
Not all conflicts are employer related. They can also arise for trustees who, for example, are scheme members or who hold trade union representative roles.
You should be alert to these types of issues and must have processes in place to manage them.
Adviser and service provider conflicts of interest
It is important that your conflicts policy also addresses potential conflicts of interest for advisers. These can arise because your advisers and service providers may recommend services or products offered by related parties, for which they may gain financial or non-financial benefit.
Where you believe that any advice or service may be compromised, you should consider further measures to manage the conflict. This may include speaking to other advisers or providers, tendering for alternate advisers or providers and comparing products. You should document any actions you take.
You should also ensure your advisers and providers have adequate arrangements in place for disclosing and managing conflicts of interest.
If your adviser or service provider is also used by the scheme’s employer, you should consider how to address potential conflicts.
Trustee toolkit online learning
‘The trustee’s role’ module contains a tutorial on ‘Conflicts of interest’. You must log in or sign up to use the Trustee toolkit.