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IAI Actuarial Core Principles · Business Management · Trusts and agency

An actuary acts as a trustee of a staff pension trust and also advises the employer on the same scheme's funding. The employer proposes a benefit change that is cheaper for it but reduces members' expected benefits. Which statement best describes the legal position of the actuary in the trustee role?

A trustee must act in the beneficiaries' interests and avoid situations where personal or other interests conflict with that duty. The employer is not her principal, so its funding role does not justify preferring its interests over members' benefits.

  1. ATrustee duties override only if the trust deed is silent on employer interests
  2. BA trustee must act in the interests of the beneficiaries and avoid putting herself in a position where her interest conflicts with her dutyCorrect
  3. CA trustee may prefer the employer because the employer funds the scheme
  4. DA trustee may keep any gain from the dual role if the employer consents
  5. A trustee is bound to follow the employer's instructions as principal

Explanation

Trustees owe fiduciary duties to beneficiaries and must avoid conflicts between duty and interest. The employer is not the trustee's principal, and employer consent does not cure a conflict with beneficiaries. Preferring the employer would breach the duty.

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