Discretion cases

A scheme’s trust deed and rules will typically leave many matters up to the discretion of the trustees. Examples may include who should receive lump sum benefits payable in the event of the death of a member, and the amount of money a member in serious ill health should be paid.  

These decisions are often difficult and trustees may need to take advice.  

Some schemes have a policy which covers the exercising of straightforward discretions. They ask their administrator to follow that policy with only more complex cases being referred to the trustees. Depending on their nature these policies may need to be reviewed by the trustees’ legal adviser.

Trustees must ensure that they declare any conflicts which might prejudice their ability to act properly, and may need to absent themselves from certain decisions. For example, it may not be appropriate for a trustee to be involved in deciding the value of benefits that should be paid to a widower who happens to be a close friend. Whilst this is clearly a conflict, other conflicts are more subtle and trustees need to be alert to them. Please see the section entitled “Conflicts of interest” for more information.