The Pension Ombudsman (“PO”) recently upheld a complaint against a professional trustee (the “Professional Trustee”) of a small self-administered scheme (SSAS) for its failure to consider whether an investment in an overseas hotel was appropriate in the circumstances. The complaint was made by a co-trustee who was also the sole member of the SSAS (the “Member Trustee”) and who alleged that the Professional Trustee had failed to conduct sufficient diligence on the investment proposed by the Member Trustee.

Whilst the decision itself is not surprising and follows established precedent in this area, it nevertheless serves as a timely reminder that the PO will hold professional trustees liable where they  are seen to have breached the duty of care incumbent on them in exercising any scheme investment decision making powers bestowed on them as professional trustee, which the PO held required the professional trustee to take an “active role” in decision-making. The determination has also highlighted the PO’s approach to apportioning liability between trustees where one trustee is a professional trustee and one is a member trustee. 


The Member Trustee took advice from an unregulated investment firm (the “Investment Firm”) to invest in hotel accommodation in Cape Verde. The Investment Firm also introduced him to a company who provide SSAS services (the SSAS provider), following which he set up a SSAS of which he was the only member. The documentation establishing the SSAS appointed a subsidiary of the SSAS provider as the first trustee and the complainant was then subsequently appointed as the Member Trustee via the adoption of the definitive trust documentation. 

In January 2014, the SSAS provider wrote to the Member Trustee to say that they understood he wished to make the investment in the hotel accommodation via a fractional ownership certificate but that they could not advise him on the suitability of the proposed investment and as such advised him to take his own appropriate legal and investment advice. The SSAS provider also sought to exclude any liability on the SSAS provider’s part in relation to the proposed investment. It was not clear in which capacity the SSAS provider wrote the letter (in its administrator capacity, on behalf of the Professional Trustee or to cover all aspects of the SSAS provider’s involvement). The Member Trustee signed what was effectively a waiver acknowledging the risks inherent in the investment and waiving any liability on the part of the SSAS provider.

The  investment was then effected in February 2014. In 2018, the Member Trustee wrote to the Investment Firm to complain about his investment and the level of return he had received on it since the investment had been made (being far lower in terms of yearly income as compared to what he had been led to believe and had guaranteed). The Member Trustee had also then been unable to sell the investment following the poor returns. This then led to his complaint about whether the Investment Firm and the Professional Trustee had carried out appropriate due diligence in assessing whether the investment was suitable.

The Pension Ombudsman’s Decision

 The PO upheld the complaint against the Professional Trustee, in its capacity as the independent trustee of the SSAS, but not the complaint against the Investment Firm. The PO directed the Professional Trustee to put the Member Trustee back in the position he would have been in had the investment not been made and to pay him £1,000 for the materially significant distress and inconvenience caused. 

The PO’s decision took into account a number of considerations, one being that the SSAS's trust deed and rules (“TDR”) did not appear to limit the Professional Trustee’s obligations. For example, by establishing it as a bare trustee, or attempting to ensure that it only followed member directions in relation to scheme investments.  

The SSAS's power of investment was granted to the Trustees, which included the Professional Trustee, as well as the Member Trustee. Under the TDR, in order to be quorate, Trustee meetings had to include the Professional Trustee and decisions made at the meetings had to be unanimous. Whilst no investment could be made without the prior written agreement of the members, it was held that only provided the member with a right to veto the Trustees' decision, rather than obliging the Trustees to follow member investment instructions.

The first key part of the PO’s determination was that it held that there was no evidence that the Professional Trustee had obtained "proper advice" on the investment as required by pensions legislation. That same legislation prevents the trustee of an occupational pension scheme from excluding or restricting the trustee's duty to take care in the performance of any investment function.  

The second key point was that the PO held that, by allowing the bulk of the Scheme's assets to be invested in the investment without fulfilling its key duties and obligations, the Professional Trustee had failed in its duty to exercise due skill and care in the performance of its investment functions. It held that it was not so much a case of the Professional Trustee trying but failing to sufficiently discharge its duties, but rather more fundamentally that it failed to even understand its duties and make any attempt to meet them, notwithstanding that it appeared to continue to charge for those services. As such, the PO did not need to consider the higher duty of care owed by professional trustees as it felt that the Professional Trustee’s failures were sufficiently serious that they failed even to meet the duty of care that exists in respect of the "an ordinary prudent man" test.

Whilst the PO acknowledged that the Member Trustee was also a trustee, it held that he was not however in a position, and did not have the knowledge and understanding, to be able to appropriately assess the suitability or otherwise of the proposed investment, therefore the PO did not consider that he should be deemed equally responsible for the position he found himself in.

Which leads on to the apportionment of liability point. Although the starting point under trust law is that trustees are joint and severally liable for the decisions made, the PO found an appropriate apportionment of responsibility, taking into account all of the circumstances outlined above, to be 80% for the Professional Trustee and 20% for the Member Trustee. This was based on the Professional Trustee’s status as such, with considerable experience of SSAS management and trusteeship, and that professional trustees "owe a duty to explain the ins-and-outs of trusteeship to less well-informed lay trustees". 


As mentioned at the start, the PO’s decision in this complaint is not unusual. The decision re-iterates that professional trustees need to be aware of their duties and responsibilities and that a professional trustee must take an active role in decision-making, rather than simply giving effect to whatever choices a member trustee makes. Whilst the PO did not need to consider the higher duty of care test owed by professional trustees, it clearly would have applied that test had the lower “ordinary prudent man” test been met. 

However, the PO went further than in previous similar decisions, by suggesting that the Professional Trustee should have taken responsibility for educating the Member Trustee about his duties as a trustee.  This appears to add another layer of duty and responsibility on professional pension trustees in fulfilling their trustee duties in respect of a SSAS where there are co-trustees who are members, a development which may not be welcomed by the professional trustee sector. 

This blog was written by Shannon Wright-Davies and Mairi Carlin