Trustee Act 2000 Investment Powers UK: Standard Investment Criteria, Review Duty and Advice

Updated 31 May 2026 · 9 min read · Trusts & Estate Planning

When a will creates a trust — for children, a surviving spouse, or disabled beneficiaries — the trustees need a legal framework for managing the trust fund. The Trustee Act 2000 provides that framework, giving trustees broad investment powers while imposing clear duties to apply standard criteria, review regularly, and take professional advice. Understanding how these rules work matters both for trustees who manage will trusts and for testators who want to ensure their trust is properly set up.

The General Power of Investment

Section 3 of the Trustee Act 2000 gives trustees a general power of investment — the power to make any investment that an absolute beneficial owner could make. This replaced the old Trustee Investments Act 1961 regime, which confined trustees to a ‘legal list’ of safe investments (government stock and similar) unless the trust deed gave wider powers.

Under the 2000 Act, trustees can invest in UK and overseas equities, corporate bonds, property funds, commodities, alternative investments, and cash — without any express authorising clause. The only exclusion from the general power is direct investment in land, which is covered separately by the power to acquire land in section 8. Both powers apply to trusts created before the Act as well as after, unless the trust deed restricts them.

The Standard Investment Criteria

Wide investment powers do not mean unconstrained investment. Section 4 TA 2000 requires trustees to apply the standard investment criteria — two interlocking tests — both when making new investments and when reviewing existing ones:

• Suitability: Is this particular investment suitable for this trust? Relevant factors include the trust’s size and duration, whether it is an income trust (needing yield) or a growth trust, the ages and financial circumstances of the beneficiaries, and any ethical restrictions in the trust deed.
• Diversification: Is the portfolio adequately spread across different assets, sectors, and geographies to avoid an undue concentration of risk? Holding 90% of a trust fund in a single company’s shares, for example, is unlikely to satisfy this criterion for a moderate-sized trust.

Trustees are judged against an objective standard — what a reasonably prudent person managing the investments of another would do. In Nestlé v National Westminster Bank plc [1994] 1 WLR 1260, the court confirmed that failure to apply these criteria and review accordingly could constitute a breach of trust, even if the bank was not ultimately liable on the facts.

The Duty to Obtain Investment Advice

Before making or reviewing investments, section 5 TA 2000 requires trustees to obtain and consider proper advice from a person reasonably believed to be qualified to give it — typically an FCA-regulated financial adviser. The adviser must specifically address whether the proposed investment is satisfactory in light of the standard investment criteria; generic market commentary is insufficient.

The duty to take advice can be waived only where the trustee reasonably concludes it is unnecessary or inappropriate — for example, where the trust fund is very small and advice costs would be disproportionate, or where the decision is wholly uncontentious (a cash transfer to a higher-interest account). Trustees who invest without advice and later face a loss must demonstrate that a reasonable trustee would also have concluded advice was unnecessary — a difficult argument for complex or high-risk investments.

The Review Duty

Section 4(2) TA 2000 requires trustees to review the investment portfolio ‘from time to time’. There is no statutory interval — reasonableness depends on the nature of the trust and its assets. Practical benchmarks:

• An actively managed equity portfolio: at least annually, with ad-hoc reviews when markets shift significantly
• A deposit-based or bond-heavy portfolio: annually, checking interest rates and credit quality
• A single-asset trust (e.g. a rental property): annually for rent level and condition; more frequently if the asset is falling in value

Each review must revisit the suitability and diversification criteria and consider whether the current investments remain appropriate. Proper advice is required on the review as well as on new investments, subject to the same ‘unnecessary or inappropriate’ exception. Trustees should document review decisions — the date, what was considered, what advice was taken, and what action was taken or not taken and why.

How a Will Can Modify the Default Powers

Section 6 TA 2000 allows the trust deed (or will) to restrict or expand the statutory powers:

• Restriction: A will can limit trustees to a narrower class of investment — government gilts and cash only, for example. Courts will enforce such restrictions strictly.
• Expansion: A will can authorise trustees to invest in unquoted shares, loans to beneficiaries, or alternative assets — investments that the standard criteria might make difficult to justify without express authority.
• Ethical clauses: A will can require trustees to avoid particular sectors (weapons, tobacco). Trustees must still achieve a reasonable return; ethical restrictions cannot be so wide as to paralyse the portfolio.
• Advice modification: A will can modify the advice obligation, though courts scrutinise this carefully for high-risk trusts.

For family trusts created by will, professional drafting of the investment clause is important. A clause that neither restricts nor expands simply leaves the statutory default in place — which is usually adequate, but professional advisers may recommend bespoke wording for larger or more complex estates.

Personal Liability for Breach

A trustee who breaches the investment duties — by investing without proper criteria, failing to review, or ignoring required advice — is personally liable to compensate the trust fund for the loss caused. Equitable compensation restores the trust to the position it would have been in but for the breach.

Protection against liability involves: documenting all investment decisions and the criteria applied; obtaining and filing written advice; holding regular, minuted reviews; and maintaining appropriate diversification. Where a trustee acts honestly and reasonably, they can apply for relief from personal liability under section 61 of the Trustee Act 1925, which gives the court a discretion to excuse a trustee entirely or in part.

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