Happy 100th birthday to the Trustee Act 1925

Of the many thousands of pages of pensions legislation, few will ever reach their 100^th birthday (or at least I fervently hope so – no one should have to wade their way through the Employer Debt Regulations in 2105 wondering what the point of them actually was).  However, on 9 April, the Trustee Act 1925 passed its century (although it did not come into force until 1 January 1926).  I have a real fondness for the Act as it is about the only piece of legislation relevant to pensions that I studied at university and which remains in force and consequently it feels like an old familiar pair of slippers. 

The driving forces behind the Act (according to Google as even I have not been in pensions long enough to recall this first hand) included a need to deal with the changing nature of trusteeship and ensure proper protection of beneficiaries.  It would seem that 100 years later, little has changed as the CEO of the Pensions Regulator has recently made a speech about the changing face of trusteeship and TPR’s intention to use its powers to raise standards of trusteeship and ensure that trustees are acting in members’ interests. 

In an age of over regulation, it is easy to overlook the provisions of the Act and consign them to legal history, however they should not be forgotten.  Sometimes they can be extremely helpful and provide power to do something that the trust deed does not. 

Useful things to remember about the Trustee Act 1925 include: 

• There is a power for trustees to “compromise, compound, abandon, submit to arbitration, or otherwise settle any debt, account, claim, or thing whatever relating to… the trust”  and to “enter into, give, execute, and do such agreements, instruments of composition or arrangement, releases, and other things as… seem expedient”.  This can be useful where trustees are looking to reach a settlement in relation to incorrect benefit payments and are wondering what powers they have to do this. 
• Trustees can “insure any property which is subject to the trust against risks of loss or damage due to any event, and… pay the premiums out of the trust funds” (modernised by the Trustee Act 2000).  This does not cover trustees insuring themselves against personal liability arising from a breach of trust.  In addition, the Pensions Act 2004 prevents premiums being paid from a scheme’s assets to cover fines or penalties so there are limitations to be aware of. 
• The Act allows trustees to use a power of attorney to appoint someone to act in their place for up to 12 months.   This can be useful where, for example, a document will need to be executed when a trustee is unavailable.   
• Where a scheme is buying-out or otherwise winding-up, protection can be obtained from unknown beneficiaries by giving at least two months’ notice in the London Gazette and another appropriate newspaper.  However, the Court of Appeal has held that this does not offer protection in relation to beneficiaries that trustees should have known about but have overlooked: “It would be astonishing if, as between the interests of the innocent beneficiaries and forgetful trustees, Parliament had intended to give precedence to the interests of the latter.”
• Where a trust deed does not contain a power allowing a trustee to resign or a trustee is refusing or unfit to act, the Act allows whoever has the power of appointment (or if no one does, the remaining trustees) to appoint another trustee in their place.  There is also a power for the court to appoint a new trustee in substitution for another where a dispute about removal is likely.  If considering these provisions, note that that the member-nominated trustee legislation stipulates that MNT arrangements “must provide that the removal of a member-nominated trustee requires the agreement of all the other trustees”.  There is also a useful provision allowing trustees to resign where no new trustee is appointed. 
• Trustees are the legal owners of trust assets so where there is a change of trustee, there needs to be a mechanism to transfer the trust assets. The Act provides that where a new trustee is being appointed and/or a trustee is retiring, trust property will automatically vest in the new and remaining trustees.  However, you need to be aware that  some types of asset are excluded from this automatic vesting and where a scheme holds such assets, provision needs to be made to vest them in the remaining trustees. 
• If things go wrong, the Act allows the court to discharge a trustee from personal liability for breach of trust where they “acted honestly and reasonably, and ought fairly to be excused”. Of course, the downside of relying on this is that the matter has to be before the court in the first place.  
• The powers given by the Act are in addition to any set out in the trust deed and they can be excluded by contrary provision in that deed.  Therefore, you need to start by checking what a scheme’s trust deed actually says before relying on any of the provisions of the Act.  

So will the Trustee Act 1925 see another 100 years?   I have high hopes for it.  Trust law is a slow moving beast, reluctant to fix what is not broken.  It has its origins in the crusades and one of the earliest pieces of trust legislation, the Statute of Uses 1536, lasted for 390 years. I definitely think it is likely to outlive almost all of the 1000s of pages of much newer pensions legislation that we currently have.  After all, there is a lot to be said for legislation based on legal principles rather than detailed regulatory legislation which tries to legislate for every eventuality, resulting in considerable complexity and frequent omissions. 

Happy birthday and long live the Trustee Act 1925!