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Conflicts of Interest

Conflicts of interest are a specific focus of the Pensions Authority’s supervisory reviews. The PA has identified COI governance — particularly in master trust structures and schemes with commercial relationships between trustees, KFHs, and service providers — as an area where governance quality is frequently inadequate. The fundamental requirement is clear: the interests of members must always come first. Where any person involved in scheme governance has a personal, commercial, or professional interest that could affect — or appear to affect — their objectivity, that conflict must be identified, declared, and managed.

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Types of Conflict

Conflicts of interest are not limited to obvious financial interests. The PA expects trustees to apply a broad definition:

Personal Financial Interests

A trustee or KFH holds shares in, or receives income from, a service provider appointed to the scheme. Includes deferred compensation arrangements, retainer relationships, and investment stakes.

Commercial Relationships

The trustee is an employee, director, or adviser of a provider that serves the scheme. This is particularly common where the employer recommends a specific administrator, investment manager, or platform.

Dual Roles

A person acts as both a trustee and as the employer’s representative, or holds a KFH role while also advising the employer. The interests of employer and members are not always aligned.

KFH Appointment Conflicts

A KFH candidate is selected by a trustee or employer with a pre-existing commercial relationship with that candidate’s firm. The appointment process may not have been independent or merit-based.

Master Trust Founder Relationships

In master trust structures, the founder or promoter often has commercial interests in the platform, administrator, or investment managers. These structural conflicts require formal governance.

Indirect Conflicts

A trustee’s spouse, family member, or associated company has a commercial relationship with a scheme service provider. The PA treats indirect conflicts with the same seriousness as direct ones.
The Pensions Authority has identified master trust structures as a particular area of COI risk. Where a master trust founder or promoter has a commercial interest in the providers appointed to serve the scheme, trustees must document the independence mechanisms in place and evidence that provider selection was conducted on merit.

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The COI Register

IORP II requires trustees to maintain a conflict of interest register — a centralised, current record of all declared conflicts and how they have been managed.

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What the Register Must Contain

For each declared conflict:
  1. Name and role of the person declaring the conflict
  2. Nature of the conflict — specific description of the interest or relationship
  3. Date of declaration
  4. How the conflict was managed — recusal from relevant decisions, disclosure to members, appointment of independent adviser
  5. Current status — active, resolved, or under review

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Maintaining the Register in PensionPortal.ai

Navigate to Schemes → [Your Scheme] → Governance → Conflicts of Interest to access the scheme-level COI register. Brokers managing multiple schemes can view COI status across their portfolio at Compliance → Conflicts of Interest.
1

Add a new declaration

Click New Declaration and complete the form: trustee or KFH name, nature of the conflict, relevant parties, and the date of declaration.
2

Record the management outcome

For each declaration, record how the conflict was managed: recusal from the relevant board vote, disclosure to members, escalation to the Pensions Authority if material.
3

Confirm annual declarations

Each year, trustees and KFHs should confirm whether their previously declared conflicts are still current and whether any new conflicts have arisen. PensionPortal.ai tracks declaration status and flags overdue confirmations.
4

Review at board meetings

COI register status should be a standing annual board agenda item. The board should review declarations, confirm management outcomes, and minute the discussion.

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Managing Conflicts in Practice

Having a COI register is not sufficient. The PA expects trustees to demonstrate that declared conflicts are actively managed — not just recorded.

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Recusal

Where a trustee or KFH has a declared conflict in relation to a specific decision (for example, selecting a provider with whom they have a commercial relationship), they must withdraw from the relevant discussion and vote. The board minutes must record:
  • That the conflict was declared
  • That the person withdrew
  • That the remaining trustees made the decision independently

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Disclosure to Members

Where a conflict is material and affects a significant governance decision, the trustee board should consider whether disclosure to members is appropriate. Legal advice should be sought where the position is unclear.

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Independent Appointments

Where a structural conflict cannot be eliminated (for example, in a master trust where the promoter retains commercial relationships with providers), the board should consider appointing an independent trustee or adviser with no commercial relationships to the relevant parties. This person’s role is to ensure that decisions affecting conflicted parties are made on merit.

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COI in Outsourcing and Provider Selection

The most common COI scenario in practice involves the selection and renewal of service providers. The PA expects trustees to apply a rigorous, documented process:
Before appointing any new service provider, the trustee board should:
  • Confirm whether any trustee, KFH, or connected person has a financial or commercial relationship with the proposed provider
  • Where such a relationship exists, document whether it affected the selection process
  • Consider whether the appointment process was sufficiently independent (for example, did an unconflicted person manage the tender?)
  • Record the due diligence outcome in the COI register
Conflicts can arise after appointment. A trustee may acquire shares in a provider, or a KFH’s firm may be acquired by a company with a relationship to the scheme. The COI register must be reviewed at least annually to identify new conflicts arising from existing provider relationships.
At the point of renewing any material contract, the board should confirm that no new conflicts have arisen since the original appointment, and that the decision to renew is based on performance evidence rather than incumbency inertia.
Where a KFH is selected from a firm with a pre-existing commercial relationship with the scheme or its employer, the appointment process must be documented to demonstrate that the selection was merit-based. The PA will scrutinise KFH appointments closely in supervisory reviews.

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Connection to Written Policies

The Conflicts of Interest Policy (Policy 6 of the 11 mandatory written policies under IORP II) provides the governance framework within which COI is managed. This page covers the operational workflow; the policy provides the legal and procedural foundation. The COI Policy must address:
  • How conflicts are identified and declared
  • The process for managing and mitigating conflicts
  • Recusal procedures
  • Annual declaration requirements
  • How the register is maintained and reviewed
Navigate to Schemes → [Your Scheme] → Governance → Written Policies → Conflicts of Interest Policy to review and update your scheme’s COI Policy.

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Further Reading