Pensions Ready Reckoner April 2020
21 / 04 / 2020
Clive Weber, Partner, Pensions & Employee Benefits Team. Please contact Clive with any queries on this Ready Reckoner.
|Pension Schemes Bill 2020||Uncertain due to coronavirus. Some House of Lords stages completed. House of Commons stages at some point. The House of Commons reconvened on 22 April 2020, on a ‘hybrid’ basis (partly remotely).||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”;
(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.
The Government has refused to back down on the new proposed offences re DB pension schemes.
|Finance Bill 2019-2021||Published 18 March 2020. Date for second reading in House of Commons depends on coronavirus.||Tapering of annual allowance relaxed|
|Governance and Administration Regulations||Meant to come into force on 6 April 2020 – current position unclear.||New requirements relating to trustees’ relationship with their investment consultants and fiduciary managers. An Order made by the Competition and Market Authority is already in force.|
NB. In view of coronavirus uncertainties, this Pensions Compass lists only key proposed legislation. Even here the legislative timetable is uncertain.
FROM THE COURTS
On 11 March 2020 the Government opened its Consultation on aligning RPI with CPI including housing component. Government said it would take decisions in Autumn 2020 – now with coronavirus timetable, wholly uncertain.
|(1) Britvic v Britvic Pensions, High Court, 17 January 2020: High Court decided switching of index for pension increases only possible to higher rate. The employer has applied for permission to appeal to the Court of Appeal. |
(2) Atos Pension Scheme, High Court, 27 January 2020: (1) general index of prices remains RPI; and (2) the words “where that index was not published” means in effect ceased to exist.
|Tax – two cases re members making late claims for protection from the Lifetime Allowance Charges||(1) Executors of Harrison deceased v HMRC: First Tier Tax Tribunal, 3 February 2020: unlike late claims for Enhanced Protection of the Lifetime Allowance, in the case of Fixed Protection HMRC has no express discretion to accept late claims. The Tribunal in “Harrison” decided that, nonetheless, HMRC does have such a discretion but that HMRC was entitled to refuse late notification in this case. |
(2) Hayes v HMRC: First Tier Tax Tribunal, 17 February 2020: the Tribunal allowed this late claim for Enhanced Protection. The evidence showed the taxpayer (a senior executive) had taken many steps to claim in time. WB comment: the case demonstrates the importance of evidencing compliance steps.
|Tax – composite transactions – unauthorised member payments||Taxpayer v HMRC, Court of Appeal, 21 February 2020: this case involved a series of transactions. Funds were transferred from the taxpayer’s SIPP with Suffolk Life and found their way, via a Cypriot company, into another company of which the taxpayer was a director and signatory and from there into the London residential property market. The Court said one must look at the practical business reality of the transaction. On this basis, the series of steps were to be viewed together as a single transaction and constituted an unauthorised payment made by the scheme to the member for which the member was liable to tax.|
|Rectification – quick and simple correction of scheme ruler||Lloyds Bank Pension Scheme Number 1, High Court 11 December 2019, judgment only recently available: the High Court enabled a mistake in consolidating scheme ruler to be corrected without a full court hearing. This continues the trend of cheaper and simpler court hearings.|
FORTHCOMING COURT DECISIONS
|Tax deductibility of employer contributions|
Sippchoice v HMRC
Upper Tax Tribunal, February 2020
|Contributions paid to SIPP by the member transferring assets – whether these “contributions” are tax deductible is the issue. The case was heard in February 2020 and a decision is awaited.|
|Inheritance tax on death benefits |
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. Wedlake Bell’s pension and private client teams have considerable expertise in this area.|
|Debt legislation: Section 75 debts in multi-employer schemes |
PS Trustee v China Shipping
Court of Appeal, March 2019
|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 last year’s High Court decision stands.|
|GMP sex equalisation |
High Court, April/May 2020
|Hearing on further GMP sex equalisation aspects, notably regarding benefits transferred out of schemes. The decision will fill in the sex equalisation jigsaw but, like the best of jig saws the judgment could be a long time ahead given the complexities, not to mention cvirus delays.|
|Sex equalisation |
Safeway v Newton
High Court, July 2020
|The CJEU decided in October 2019 that EU law prevents levelling down benefits for the period prior to scheme rules being formally amended save, exceptionally, 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. The financial impact of cvirus on the Scheme’s finances may help Safeway’s case.|
|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. This case underlines the importance of accurate drafting.|
Other developments in light of cvirus:
Courts – the Courts are operating mainly remotely. The High Court has published its Plan for dealing with urgent cases.
Brexit Transition Period – the House of Lords has recently commented on what cvirus may mean for the Transition Period which is at the moment due to end on 31 December 2020. A decision will be needed by 30 June 2020 regarding any extension and it seems any extension may require legislation.
Several pension Consultations have been extended in light of cvirus including:
(1) Alignment of pension scheme disclosure obligations with the climate change task force requirements – Consultation period extended to 2 July 2020
(2) TPR Consultation on Guidance on new Funding requirements – Consultation period extended to September 2020.
(3) The Consultation period on alignment of RPI with CPI (see above under FROM THE COURTS) has been extended to 21 August 2020.