Discretionary decision-making can feel tricky at the best of times for trustees seeking to ‘do the right thing’. With the increase in virtual meetings, systems for decision-making might be a bit different to normal and practices might need to be adjusted slightly. Many discretionary decisions will be relatively straightforward but here we offer some practical tips to give trustees confidence in recording more complex discretionary decisions affecting individual members’ benefits.
For tips on approaching ‘big’ discretionary decisions which affect members more generally, Peter Murphy provides useful guidance in his blog “Robust trustee decision-making in these difficult times”.
Before you start
Check your Trust Deed and Rules. This will help you answer a number of important questions, including:
- What is the scope of the power that you are being asked to exercise?
- Whose decision is it under the Rules? Are there any delegations to a sub-committee?
Having considered this, look at any supporting information that the scheme might hold to help guide the decision-making process:
- What do any policies or procedures say about how the decision will be taken? Are there any timescales provided?
- Are processes clear to ensure the required information is gathered?
- Are the decision-makers clear on their legal duties?
Whilst these initial building blocks seem straightforward, regular checks will ensure that the processes operating in practice match those set down on paper. Systems are crucial in gathering all information required to make a discretionary decision.
Recording your decision
Once you have all of the information that you need to make a decision, the crucial next step is to record that decision. Trustees will want to avoid undertaking a thorough process and reaching a decision in a complex case only to have that decision remitted by the Pensions Ombudsman (“TPO”) because the record of the decision isn’t satisfactory. Although rare, we do see this happen from time to time.
Check the facts
While this is not a prescriptive checklist, in particularly complex cases we recommend noting:
- the information that was available for consideration;
- details of any trustees’ requests for further information;
- any information the trustees were unable to obtain (but might have assisted in making the decision).
What are your reasons?
- Recent TPO decisions make it clear that trustees are now expected to conduct a thorough interrogation of information, particularly in unusual or difficult cases. Minutes of your decisions should reflect this process.
- In making discretionary decisions, trustees have a duty to only consider relevant factors and disregard irrelevant factors. Some factors will inevitably be given more weight than others, and so it’s important that the record reflects this, so that those not involved in the process can understand why a decision was reached.
Remember your (potential) audience
- If a discretionary decision is later challenged, it’s possible the minutes of the decision will be shared with affected individuals or TPO, who will seek to understand the steps taken to reach the decision. Therefore, the note of the decision should be accurate, clear, and should not contain irrelevant content. Cross-refer to your decision-making procedures.
- Document the evidence considered and how you’ve arrived at your decision based on that evidence. Include sufficient detail to capture the thought-process followed, but this needn’t be so granular to leave the trustees open to misinterpretation or undue scrutiny.
- Be wary of “plagiarising” your previous decisions or records. TPO expects each case to be decided on its own merits – whilst it’s fine to use a template as a basis for your records, this should be shaped to fit the circumstances of the decision you are recording.
Communicating your decision
The final piece of the jigsaw is the communication of the decision to the affected parties. This is particularly important in complex cases, as good communication with a potentially disgruntled party can help to avoid a complaint.
TPO’s firm view is that those affected by the decision should be provided with enough detail to understand the reasons why it was taken.
If affected parties are not provided with reasons, it’s open to TPO to make an award for distress and inconvenience or to order that the decision be remitted to the trustees in order to be re-taken, even if the decision itself is not flawed – something all trustees will be keen to avoid.
Of course, if you have any queries about documenting or communicating these types of decisions, or the process more generally, don’t hesitate to get in touch with your usual Sackers contact.