Trustees investment duties

The general duty of care

There is a substantial body of case law considering the duties of trustees in relation to investment, much of which remains relevant although the Trustee Act 2000 imposes some statutory duties. The first of these statutory duties is the statutory duty of care. Trustees are required to exercise such care and skill in relation to investments as is reasonable in the circumstances. A higher standard of care is expected from trustees acting in a professional capacity and where the trustee claims to have special knowledge or experience. This is no more than a statutory restatement of the principles which had been established by the cases with a clarification of the position of professional trustees.

The standard investment criteria

The trustee Act 2000 s 4 requires all trustees exercising a power of investment, including trustees exercising express investment powers, to have regard to what are described as the standard investment criteria, (these criteria are not new. They first appeared in the Trustee Investments Act 1961, s 6(1)). There are two such criteria. First, the trustees must have regard to the suitability of the investment concerned, and secondly to the need for diversification. The trustees must have regard to these standard investment criteria both in making investments, and also in periodically reviewing the investments. The responsibilities of trustees in relation to investments are ongoing-they cannot invest funds and then forget them. They must keep the investment portfolio under periodic review.

The need for advice

A further requirement of the Trustee Act 2000 is that trustees must normally take proper advice on investment decisions. The Trustee Investments Act 1961 required trustees always to take advice before making all but a very limited range of investments. This requirement has been changed by the 2000 Act.

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For more information on:

  • Financial considerations
  • Ethical considerations
  • Periodic review of investments