Trustees’ Fiduciary Duty to Pursue ‘Run On’ in Members’ Best Interests

Actuaries are required by new Government regulations TAS300 v2.0 from April 2024 to consider credible alternatives to bulk transfers – like Run On 4 Good – in advising trustees and sponsors.  Risk-benefit assessments are required to establish “members’ best interests”.  
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C-Suiteps Analytics provides the modelling. The output challenges standard advice of trustees and their professional advisors.  Trustees and sponsors will have to re-engage in strategic rethink ahead of bulk transfers.

​A calculation of downside risk	T​he PPF safety net covers a large, growing proportion of benefits limiting the downside risk to members. The probability by any year of the scheme entering PPF given the strength of the sponsor needs to be factored into the risk assessment.
Upside benefit of discretionary improvements	​The level of surplus generated from running on over time with a stable investment return target builds over time.  Negotiation is needed between parties on the value of the surplus that will be available to past and present employees. (C-Suiteps Analytics shows how to model multiple outcomes.)  Public policy changes on use of surpluses will facilitate discussions.
Trustee response	​Where the risk is modest and falling and the benefit material and rising, the trustees’ fiduciary duty needs reconsideration.  Trustees should put proposals to the sponsor in the best interests of members.  A written sponsor confirmation of opposition to surplus sharing will be needed if it vetoes run on proposals ahead of a bulk transfer.  This could protect trustees against subsequent member legal challenges.
Sponsor response	​Given S172 CA 2006 Statements, ESG commitments and the earnings, cash and value upside to shareholders, sponsors will need to reset strategies to address run on and surpluses.
Legal consequences	​Non-compliance with TAS300 v2.0 and failure to pursue a run on strategy shown to be in member best interests creates legal vulnerabilities for trustees and advisers.  Class action on value lost is possible - not just a case about who the annuity provider is. (Ref Rothesay / Prudential or AT&T/Athene)
Professional indemnity and run off insurance	​The price and availability of insurance cover expected to run alongside a bulk transfer will need re-examination.  Where bulk transfers are pursued which are not established clearly to be in member best interests, actuaries, lawyers and professional indemnity insurers need to reflect on how to respond to member/ shareholder challenge.