The reason that a review of the role and contribution of the law of trusts to the law relating to pensions is important is because in 2004 alone there were 927 billion worth of private pension funds under management in the UK, holding 16 per cent of the domestic ordinary share market, which is the largest in Europe and third largest in the world (Slattery and Nellis, 2004).Today pension funds of several British Corporations run into larger amounts athat their own market capitalisation (Slattery and Nellis, 2004). The law relating to pension schemes is derived from the old trusts law(sometimes even dating back to the eighteenth century). Cooper, D.R. (2000) .
Even though the courts have recognised the different nature of pensions as compared to traditional trusts it seems that there are still gaps in this area.(Hales, C., Gough, O 2003) Private sector pension schemes are set up as trusts and a trust fund will be created to which the employer has to contribute(sometimes the employees may be required to contribute as well).
The concept of trust developed with the purpose of the facilitation of the passage of inheritance and property to a trusted party (trustee or trustees) for the benefit of a third party (beneficiary or beneficiaries).Therefore when trusts are set up in the form of pensions for employee benefits the current and former employees along with their family members become the beneficiaries of this scheme. Hales, C., Gough, O. (2003) These schemes allow the trustees to own the legal title to the assets of the scheme and invest this .They must invest this capital for the benefits of the members of the scheme and look after the interests of pensioners and the current employees. Hales, C., Gough, O. (2003)
Best interests have been defined as those confined to monetary goodwill i.e. being able to obtain maximum amount of pension through the prudent investment of the trustees. In this regard the Pensions Act 1995 puts an obligation upon the trustees to make prudent and risk free investment decisions. The Act prevents them from escaping liability through exclusion clauses in the deeds and must take care in ensuring that a proper person is appointed for the purposes of managing such investment.The trustees will be able to draw up a statement of investment principles.They will be able to decide upon whether a member leaves the scheme and whether to pay a certain person earlier due to death or ill health.
The most significant intertwining of the law of trusts and law of pensions occurs when the Courts refuse to intervene into the trust matters following the extensive powers conferred upon the trustees to make decisions. (Duncan, C., Loretto, W., White, P.2001).However the Court will be prepared to intervene to ensure whether these powers have