Regulation is required to address the “increasingly poor” standards of governance and trusteeship at many UK healthcare trusts, according to Halcyon Trustees.
The call for regulation follows a warning from founders John Dean and Elliott Hurst upon Halcyon’s June launch that any potential thematic review of the sector from regulatory bodies could impose much stricter rules than present.
It also follows on from rules that came into force last month requiring healthcare trustees to register with HM Revenue & Custom’s new trustee registration service (TRS) or risk being held personally liable.
Despite the new rules, Halcyon Trustees managing director Dean (pictured) revealed research by the firm has highlighted the increasingly poor standards of governance and trusteeship of many UK healthcare trusts.
The findings also indicated that most of these arrangements do not comply with HMRC requirements and were undoubtedly in breach of best practice guidelines for trustees, Dean said.
He added that low levels of governance can be blamed on a lack of regulation in the sector, with advisers and administrators receiving no formal guidance in respect of rules and standards of governance required.
And Dean argued the weak position of many healthcare trusts left trustees exposed to possible legal action from beneficiaries and at risk of significant reputational damage, as well as potentially large fines.
Dean attributed the situation to various factors, including:
- No legislation – there is no legal framework in place to demand how healthcare trusts should be governed, unlike pensions. With no clear rules, advisers are working without a checklist to follow.
- No regulation – unlike medical insurance, healthcare trusts are not regulated, so there is no requirement for formal competency checks to ensure advisers and administrators are sufficiently qualified.
- Lack of trustee training – trustees often have little or no experience and are rarely trained in their substantial responsibilities. Many trustees are simply unaware of their duties and risks and very few appoint an independent expert trustee.
- Advisers’ scope of work – many advisers do not regard clients’ governance and trusteeship as their responsibility. Some advisers do not even hold the trust deed and rules, nor do they clearly explain trustee responsibilities and duties at trustee meetings.
- Limited administration support – many administrators solely view their role as administration of a benefit schedule, without any reference to the trust deed and rules and actively decide to not take responsibility for checking the rules the trustees should be adhering to.
“We have even seen some master trust suppliers who do not appoint independent trustees – this would be unthinkable in the pension master trust environment,” Dean continued.
“With an ever-growing number of the large employers and prestigious brands in the UK wanting to use healthcare trusts, improving governance standards to protect these employers and their beneficiaries is now more vital than ever.
“We believe now is the time to seriously consider imposing regulation on this sector in order to protect beneficiaries and employers and to retain ongoing confidence in the UK financial services sector.”
