Pensions Ready Reckoner- December 2019

11 / 12 / 2019

PARLIAMENT

Recent Legislation Date Effect
Civil Partnership (Opposite-sex couples) Regulations
SI 2019 No. 1458
2 December 2019These Regulations amend the definition of civil partnership and the eligibility rules for registering as civil partners, to remove the same-sex requirement. The upshot is that opposite sex partners can now register as civil partners. Whether scheme rules need amending depends on the definition of "civil partner" in the scheme rules and we can advise on this. For the background to opposite sex civil partners, see Alison Hills' Podcast "Pension Benefits for Surviving Spouses and Civil Partners" www.wedlakebell.com/legal-podcast.
GMP sex equalisation – Regulations to remove any statutory requirement to find a comparator in relation to GMP equalisation claims In its conversion guidance in April 2019, DWP said the Government will introduce this provision as soon as time permits Hopefully the new Parliament will deal with this and any changes to the existing legislation to facilitate the statutory method of converting GMPs into non-GMP benefits which some schemes may wish to use to iron out GMP inequalities.
Proposed Legislation Date  
Introductory note: The General Election due on 12 December 2019 means that many Bills recently introduced in Parliament have been lost including the Pension Bills mentioned below.
Divorce (Financial Provision) BillLost due to Election – may be re-introduced This private member's Bill introduces as a fair starting point the equal division of property and pensions acquired by a couple after marriage.
Pension Schemes Bill 2019/2020Expected to be re-introduced in the new Parliament This Bill contains important provisions. The main features are:
This Bill contains important provisions. The main features are:
(1) strengthening the Pensions Regulator's powers, including the introduction of new criminal offences where persons act recklessly re DB schemes – please see our separate article below on the potential significant impact;
(2) establishing a framework for "collective defined contribution schemes";
(3) tightening the provisions relating to statutory transfers so as to counteract pension scams; the evidence needed to establish an individual's 'employment' connection where the transfer is to another occupational pension scheme will be specified in new Regulations; and
(4) new requirements relating to the appointment of the trustee chair and production of a funding strategy statement.

Proposed Legislation Date  
Introductory note: The General Election due on 12 December 2019 means that many Bills recently introduced in Parliament have been lost including the Pension Bills mentioned below.
Divorce (Financial Provision) BillLost due to Election – may be re-introduced This private member's Bill introduces as a fair starting point the equal division of property and pensions acquired by a couple after marriage.
Pension Schemes Bill 2019/2020Expected to be re-introduced in the new Parliament This Bill contains important provisions. The main features are:
This Bill contains important provisions. The main features are:
(1) strengthening the Pensions Regulator's powers, including the introduction of new criminal offences where persons act recklessly re DB schemes – please see our separate article below on the potential significant impact;
(2) establishing a framework for "collective defined contribution schemes";
(3) tightening the provisions relating to statutory transfers so as to counteract pension scams; the evidence needed to establish an individual's 'employment' connection where the transfer is to another occupational pension scheme will be specified in new Regulations; and
(4) new requirements relating to the appointment of the trustee chair and production of a funding strategy statement.

FROM THE COURTS – SELECTED RECENT DECISIONS

TopicEffect
Raising State Pension Age
Delve v DWP
3 October 2019
Challenge to Government raising State Pension Age for women – challenge dismissed, as in the circumstances the Court held raising the State Pension Age was not discriminatory on grounds of age or sex. This may not be the end of the story. The Labour Party manifesto pledges to negate this ruling by making payments to the 3.7 million women affected. This aligns with the WASPI campaign (Women Against State Pension Inequality).
Trustee Powers
British Airways
High Court, 31 October 2019
The High Court has approved settlement terms agreed between BA and the BA Trustees. Accordingly the appeal from the Court of Appeal to the Supreme Court is not proceeding. Various trust law issues e.g. true legal scope of trustees' duties and powers remain unresolved. The High Court was satisfied that the settlement was on terms a reasonable body of trustees could reach. The fact that the scheme Trustees had obtained a costs order for an appeal did not prevent the Trustees subsequently deciding not to appeal and instead agreeing settlement terms.
Misinterpreting "redundancy" in the Universities Superannuation Fund Rules
Downe v USS
High Court, 13 September 2019
The High Court decided the Pensions Ombudsman ("PO") had applied incorrect tests in deciding whether the termination of employment was by "reason of redundancy". The existence of a compromise agreement between employer and employee does not of itself settle this question. The High Court has sent the case back to the PO to apply the correct test.
Correction of Scheme Rules
Blatchford v Blatchford
High Court, 24 October 2019
The decision illustrates the High Court's increasing willingness to rectify (correct) scheme rules in cases where rule changes were clearly not intended. In this case, the scheme's rules relating to increases to pensions in payment were incorrectly worded in 1996 and the Court ordered correction. A fast track procedure was used to obtain this result.

FROM THE COURTS – SELECTED FORTHCOMING DECISIONS With over 50 pension cases pending, 2020 will be a busy year. If you have any issues similar to those below, please contact us.

TopicEffect
Level of PPF compensation
Bauer case
Court of European Justice,
19 December 2019
The Advocate General decided in May 2019 that the relevant EU Directive requires 100% compensation for lost member benefits on employer insolvency and that, if the EU State's compensation arrangements were insufficient, the member could directly claim against the State. The spectre of possibly having to provide 100% compensation in all cases is worrying for the PPF and, if required, could encourage the Pensions Regulator significantly to shorten deficit recovery periods to protect the PPF from 100% claims However, it remains to be seen whether in its final decision due on 19 December 2019, the CJEU will give members this unexpected Christmas present.
Unauthorised member payments due under Finance Act 2004
Clark v HMRC
Court of Appeal, 29 January 2020
This case involving a pension transfer, subsequent surrender of pension rights and payment to a company in the British Virgin Isles provided much for HMRC to get its teeth into. However, exactly how the tax legislation works and the amount of tax due is less clear. Hopefully the Court of Appeal will clarify.
Contributions by member to his SIPP by transfer of shares
Sippchoice v HMRC
Upper Tax Tribunal, February 2020
The taxpayer won in the First Tier Tax tribunal, which decided the taxpayer's "in specie" contributions to his SIPP (in the form of shares) were tax deductible. HMRC is now appealing.
Inheritance Tax – death benefits
HMRC v Parry
Heard 31 October 2019, judgment awaited
The Supreme Court's interpretation of the IHT legislation on pension transfers and ensuing death benefits are likely to be of wide interest, bearing in mind the considerable increase of DB to DC scheme transfers in recent years.
Section 75 debts and multi-employer schemes
PS Independent Trustees v China Shipping
Court of Appeal, March 2020
How the section 75 legislation works in the context of segregated/non-segregated schemes. The effect of the section 75 legislation in this area is unclear despite Government's efforts over the years to achieve clarity.
Operation of pension increase rule
Britvic v Britvic Trustees
High Court, January 2020
This case demonstrates the problems of operating schemes with vague rules about pension increases.
Pension increase rule (again)
Mitchells & Butler
High Court, June 2020
Whether rule changes relating to increases where effective or ineffective.
Pension increases (yet again)
BIC UK v Hartridge
High Court, January 2020
Complex litigation relating to the proper application of pension increase rules and alleged overpayments. This case and the two cases listed immediately above indicate the need for sound legal advice on scheme rules relating to increases to pensions in payment and/or revaluation of deferred pensions. Please contact us if you have any queries on these matters.
GMP sex equalisation
Lloyds Bank
High Court, April/May 2020
How in the context of transfers-out, sex equalisation of GMPs is to be achieved and at whose cost – the paying or the recipient scheme – is at issue here. Whether the High Court will also give guidance on other matters left over from the Lloyds Bank High Court hearings in 2018 (such as whether GMP equalisation steps are needed where the cost would be excessive compared to the benefit) remains to be seen.
Sex Discrimination: retrospective levelling-down
Safeway v Newton
Court of Appeal, hearing date awaited
Following the European Court decision on 7 October 2019 that European law prevented retrospective levelling down, the case returns to the Court of Appeal to assess whether retrospection would risk seriously undermining the financial balance of the pension scheme. If so, the European Court indicated this could be a sound public interest reason for allowing retrospective levelling down. Please see Paul Ashcroft's comments in the article below