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The Pensions Regulator

Codes of practice

Codes of practice

Code of practice 07
Trustee knowledge and understanding (TKU)

Application and readership

  1. This code applies to all trustees, individual and corporate, of all occupational schemes (including those stakeholder pensions schemes set up under trust) with the exception of trustees of small schemes of fewer than 12 members either where all members are trustees and are equal decision makers; or where all trustees are directors of a company which is the sole trustee, and all members are equal decision makers.1
  2. Where there are overseas trustees of schemes in the UK, the provisions of this code apply in the same way as they apply to trustees based in the UK.
  3. The code also applies to trustees of group schemes (e.g. centralised schemes and industry-wide schemes). Their learning needs will include those set out in this code and Scope Guidance but are likely to exceed them.
  4. This code is recommended to a wider readership comprising employers who sponsor schemes, schemes' advisers, fund managers and administrators, scheme members and training and examination providers who are interested in this area of trustee knowledge and understanding.

The legislative requirements for individual trustees

  1. The trustee knowledge and understanding requirement 2 states that individual trustees of an occupational pension scheme must have appropriate knowledge and understanding of the law relating to pensions and trusts, the principles relating to the funding of occupational pension schemes and the investment of the assets of such schemes. There is also within the legislation an opportunity to prescribe other matters for trustee knowledge and understanding although none is envisaged at present.
  2. The degree of knowledge and understanding required is that appropriate for the purposes of enabling the individual properly to exercise the function in question.
  3. Individual trustees must also be conversant with their own scheme related documents. These are described as the trust deed and rules of the scheme, any statement of investment principles and the most recently prepared statement of funding principles.
  4. Individual trustees must also be conversant with any other document recording current policy relating to the administration of the scheme generally. The requirement to be conversant with scheme documents is dealt with in paragraphs 66-80 of this code.
  5. For the purposes of this code, being conversant with documents is taken to mean having a working knowledge of those documents such that the trustees are able to use them effectively when they are required to do so in the course of carrying out their duties as a trustee of a scheme.

The legislative requirements for corporate trustees

  1. There is an obligation on the corporate trustee to secure that each individual who exercises any function which the company has as trustee of any relevant scheme has knowledge and understanding of the same matters i.e. pensions and trust law, and the principles relating to funding and investment.3
  2. This will apply whether the corporate trustee is:
    • a corporation formed to act as a professional trustee for any number of pension schemes;
    • a corporation formed only for the purpose of acting as a trustee of a particular pension scheme; or
    • a company (e.g. the sponsoring employer) acting as the scheme trustee with or without additional members of the trustee body.
  3. Exactly the same arrangements will cover the requirement to be conversant with scheme documents.

1. See The Occupational Pension Schemes (Trustees' Knowledge and Understanding) Regulations 2006
2. See section 247 of the Pensions Act 2004
3. See section 248 of the Pensions Act 2004