US pension savers’ multi-million pound legal victories against their schemes highlight the risk of UK trustees being sued for failing to manage charges properly, the Transparency Task Force (TTF) has warned.
Speaking at an Association of Member-Nominated Trustees meeting today, TTF chair Andy Agathangelou said trustees that could not evidence they had carried out their duties to protect members interests by managing costs and charges properly could face legal proceedings from members in the event that pension payments were not made.
Pointing to high profile cases such as BHS and British Steel, where members had either lost benefits as a result of going into the Pension Protection Fund or faced the prospect of doing so to avoid going into the PPF, Agathangelou said trustees needed to be able to demonstrate the had done everything within their power to keep costs and charges to a minimum.
Agathangelou cited class actions brought by US attorney Jerome Schlichter, who has handled nationwide class actions on behalf of employees and retirees in large 401(k) plans alleging excessive fees and conflicts of interest that reduce employees’ and retirees’ retirement assets.
Schlichter has obtained more than $300m (£210m) in settlements for employees and retirees, in addition to significant improvements in their 401(k) plans. He also was lead attorney for in a full trial of an excessive fee case in the US, which resulted in an eight-figure verdict on behalf of employees, and retirees in the ABB 401(k) plan.
In 2014 and 2015, Schlichter ’s firm obtained the two largest 401(k) excessive fee settlements in history. The first was a settlement for $62m (£43m) against Lockheed Martin on behalf of Lockheed Martin employees, which included significant changes to the Lockheed Martin 401(k) plan. The second was a settlement for $57m (£40m) from Boeing.
In 2015, Schlichter won a unanimous 9-0 decision in the U.S. Supreme Court in Tibble v. Edison, the first US Supreme Court case to consider fees in 401(k) plans.
Agathangelou said: “It is terribly difficult for trustees to manage costs & charges
“You can’t manage what you can’t measure. So you might not be managing costs & charges properly. Whereby you’d be failing in your duty as trustees
“We don’t blame trustees for this – it really isn’t their fault. But it is their responsibility.
“For DC Schemes it’s about achieving better outcomes. For DB Schemes it’s about protecting the sustainability of the scheme, because excessive costs contribute to excessive deficits, and the sponsor, because excessive deficits undermine sponsor viability.
“For state-funded schemes it’s also about reducing the adverse impact on the tax-payer and our society as a whole.”