Trustee and adviser fees and expenses

Trustee and adviser fees and expenses are generally paid either by the trustees out of scheme funds, or by the employer. They can be significant. It is important to set up and follow budget monitoring procedures so that everyone’s responsibilities and authorities in this area are clear. This should result in invoices only being settled when appropriate, and on time, meaning that there will be no interest added for late payment.

Many sponsoring employers ask for input from their trustees and advisers to produce an estimated annual budget, broken down into estimated monthly fees and expenses. Once the budget is agreed it can be used as a check against any monthly invoices. If the invoice is on or below budget it can be paid. If the invoice is above budget then further consideration is required. There will of course be many good reasons why a given invoice would exceed the budget – for example, there may have been a development in legislation, or an unexpected issue affecting a group of members. Ideally advisers would alert the trustees to any unpredicted costs before they are incurred. The trustees should in turn keep the employer informed via a pre-agreed protocol.

Information from the budget may feed into cashflow monitoring for the scheme to ensure that there is enough cash in the scheme to pay benefits when they fall due.

Invoices submitted by advisers need to be carefully checked and any queries raised with them. If insufficient information is provided with invoices then more detail should be requested.  

Special arrangements may need to be in place to authorise professional trustee fees as it would not be appropriate for the professional trustee to sign off their own fees.

The required level of trustee input on this topic at board meetings will depend upon the budget monitoring procedures in place. The day to day management and monitoring of this can be delegated by trustees, for example to the scheme secretary or pensions manager, but the trustees must understand the process and receive management information at meetings in order that they can provide oversight. 

Budget monitoring procedures will need to be reviewed periodically to ensure that they remain appropriate.