Pensions Ready Reckoner

24 / 02 / 2020

PARLIAMENT

Recent Legislation Date Effect
BREXIT – European Union (Withdrawal Agreement) Act 202024 January 2020As of 31 January 2020, the UK ceased to be an EU Member State. However, during the implementation period to 31 December 2020 ("IP"), the UK continues to be treated by the EU as an EU Member State for many purposes including the jurisdiction of the Court of Justice of the European Union.
Statutory instruments made consequential on BREXITVarious To ensure relevant UK legislation continues to operate effectively during the IP and on its expiry if on 31 December 2020 there is no deal with the EU.
Trustees' relationship with their investment consultants and fiduciary managers – Governance and Registration Amendment Regulations Regulations expected to come into force on
6 April 2020
These changes follow on from the Competition and Market Authority's ("CMA") review of the relationship between trustee boards and their appointed investment consultants and/or fiduciary managers. The new Regulations reflect the CMA Order. Subject to certain exemptions, trustee boards need to ensure they are legally compliant e.g. have set objectives for their investment consultants. Trustees will need in due course to report on whether they are compliant. In March 2020 Government is due to publish Guidance for trustees on climate control disclosure obligations as part of trustees' ESG policies.
Statements of Investment Principles (SIPs) – Regulations requiring additional disclosures Investment and Disclosure Regulations made 3 June 2019 The Investment and Disclosure Regulations added new requirements for SIPs from 1 October 2019. Additional disclosures re trustees' relationship with asset managers, and trustees' publication of their latest SIP are required to be published on the scheme's website (by 1 October 2020 at the latest for DB schemes).
Opposite sex civil partners regulations 31 December 2020Provides for individuals of opposite sex to form a civil partnership and to be treated in the same way as same sex couples in a civil partnership.
Proposed Legislation Date  
Pension Schemes Bill 2020Reintroduced in Parliament on 7 January 2020
Committee stage in House of Lords – 24 February 2020 and onwards
The Bill is expected to be become law by July 2020. Main features include:
(1) introduction of new financial penalties and criminal offences for persons recklessly dealing with DB schemes. See our December 2019 Pensions Compass article "Hot air, or real deterrent" [insert hyperlink];
(2) introducing collective defined contribution schemes;
(3) tightening provisions relating to statutory transfers; and
(4) new requirements re the appointment of trustee chair and the chair's obligations including in relation to the scheme's funding strategy statement.
Many amendments tabled for discussion during the House of Lords Committee stage.
Member Complaints – amending RegulationsExpected by 6 April 2020Streamlining of member complaints to Pensions Ombudsman ("PO"), and guidance requests to the new financial guidance body (once established). Complaints to the PO intended for the PO's early resolution service will not be expected first to have been through the hoop of a scheme's internal dispute resolution procedure.
Finance Bill 2020 Royal Assent expected July 2020 A draft of the Finance Bill is expected to be published on Budget Day on 11 March 2020. Whether there are any changes to pensions tax remains to be seen.

FROM THE COURTS

TopicRecent decisions
Pension increases – whether permitted reduction
Britvic v Britvic Pensions
High Court, 17 January 2020
Yet another case turning on the specific wording of the scheme's pension increases Rule. The High Court decided that the cap expressed as RPI ("and any other rate") meant switching was possible only to a higher cap, and did not permit switching to a lower increase rate.
Unauthorised payments surcharge – SIPP member could not avoid the surcharge on the "just and reasonable" ground
Rowland v HMRC
First Tier Tax Tribunal ("FTT"), 7 January 2020
The SIPP member had entered into certain transactions indirectly involving his SIPP. This gave rise to "unauthorised payments" tax charges on the member. The member appealed against HMRC imposing the unauthorised payments surcharge, arguing it would be just and reasonable not to impose the surcharge. The FTT disagreed and held the surcharge was correct. (A more benign approach was reflected in Hughes v HMRC in 2019 where the facts were so complex that it would be unreasonable to impose the surcharge – the member's state of knowledge may be key in these cases).
Pension increases
Re Atos Pension Scheme
High Court, 27 January 2020
The use by the scheme of RPI was correct. The Court decided:
(1) general index of retail prices index meant RPI; and
(2) the words "where that index was not published" meant, in effect, ceased to exist.

FORTHCOMING COURT DECISIONS

TopicEffect
Contributions to SIPP – tax deductibility
Sippchoice v HMRC
Upper Tribunal tax, February 2020
The taxpayer paid his contributions by transfer of assets rather than cash. HMRC have challenged the tax deductibility of these payments.
Debt legislation: Section 75 debts in multi-employer schemes
PS Trustee v China Shipping
[Court of Appeal, March 2020]
How section 75 debts work in the context of segregated/non-segregated multi-employer schemes. On 5 February 2020 permission was refused to appeal to the Court of Appeal, so unless this is reversed the High Court decision will stand.
GMP sex equalisation
Lloyds Bank
High Court, April/May 2020
Hearing on further GMP sex equalisation aspects, notably regarding benefits transferred out of schemes.
Sex equalisation
Safeway v Newton
High Court, July 2020
The CJEU decided in October 2019 that EU law prevents levelling down benefits prior to scheme rules being formally amended save, exceptionally, on grounds such as where otherwise the financial position of the scheme would be seriously undermined – in the hearing in July 2020 the High Court will rule whether this is, or is not, the case in the circumstances of the Safeway Scheme.
Scheme amendments invalid?
Mitchells Pensions v Mitchells Plc
High Court, June 2020
Claim by trustee that scheme amendments made in 1996 incorrectly gave the employer power to decide the rate of pension increases and failed to preserve the trustee's power to select the relevant index for price indexes. WB comments: this case underlines the importance of accurate drafting.
Inheritance tax on death benefits ("IHT")
HMRC v Parry (Staveley case)
Supreme Court, 31 October 2019
Supreme Court judgment awaited. The judgment will hopefully throw light on how the IHT legislation works in relation to transfers from defined benefit to defined contribution schemes – a popular move, sometimes aimed at wealth protection. WB's pension and private client teams have considerable expertise in this area.

THE ROAD AHEAD

Topic Date Effect
TPR new code of practice on funding DB schemesDraft expected Spring 2020Likely to specify long term funding objective for schemes.
Government consultation on how to align the calculation methodology for the Retail Prices Index with the Consumer Prices Index including owner occupier housing costs Consultation to open on 11 March 2020 (Budget Day)
Government decision expected Autumn 2020
The change (if implemented as expected) is likely to take effect in the period 2025 to 2030. Those schemes with RPI linked member benefits may benefit, but this may be counteracted if the scheme's assets include RPI linked bonds. It is unclear how far the changes will automatically override scheme rules.
GMP sex equalisation Limited HMRC guidance, February 2020In addition to transfers out (see above under Forthcoming Court decisions), the tax treatment of payments to iron out GMP inequalities remains uncertain. Until full HMRC guidance appears, ironing out GMP inequalities will be difficult/impossible. On 20 February 2020 HMRC issued limited guidance – how far this assists will vary from scheme to scheme, please refer to us.