| PARLIAMENT | ||
| Recent Legislation | Date in force | Effect |
| Age Discrimination – Equality Act Exemptions Order | 15 May 2019 | Consequential on increases in State Pension Ages, permits schemes to continue paying bridging pensions without breaching age equality requirements. |
| Civil Partnerships, Marriages and Deaths (Registration) Act 2019 | 26 May 2019 | In relation to pensions, the Act paves the way for opposite sex couples to marry or register a civil partnership. The new civil partnership facility is dependent on Government making the necessary Regulations. Please refer to Alison’s podcast, published May 2019, for a run through of the legal developments relating to same-sex spouses and civil partners. |
| Investment Disclosures (SI 2018/988) | 1 October 2019 | By 1 October 2019, Trustees to clarify in their Statement of Investment Principles (1) their policies on “financially material considerations” including Environmental, Social and Governance (ESG) considerations, which the trustees consider financially material factors, and (2) the extent to which (if at all) they take into account “non-financial matters”, and (3) stewardship matters. |
| Proposed Legislation | Expected Date | |
| Divorce (Financial) Provisions Bill | 2019/2020? House of Commons stages of Bill awaited | The Bill specifies as a fair starting point equal division of all property and pensions acquired by the couple after marriage. |
| Pension Charges Bill 2017 – 2019 | 2020? First reading in House of Commons 8 May 2019 | The Bill requires pension providers to publish standard information on charges for pension products and to cap such charges. |
| Pensions Bill 2020 | ? | Subject to Parliamentary time, it seems the Government may introduce a Pensions Bill to fill certain gaps in existing legislation relating to conversion of GMPs into non-GMP pension. |
| DWP Consultations | Date | |
| DWP – Consultation on Collective Defined Benefit Schemes (“CDCs“) | 6 November 2018 | Government is committed to enabling employers to provide a third type of scheme structure, reflecting risk sharing between employers and employees. Timing uncertain due to BREXIT. |
| DWP – Strengthening TPR’s powers | January 2019 | Following the BHS and Carillion problems, Government will introduce two new criminal offences, including harming schemes by wilful neglect, as well as legislation to strengthen TPR’s powers of investigation and inspection. Timing uncertain due to Brexit. |
| DWP – Guidance for statutory conversion of GMPs | April 2019 | Paves the way for ironing out the unequal effects of GMPs, by converting members’ GMP benefits into non-GMP scheme benefits. However, some issues remain including the need to identify members’ historical employer to obtain employer consent to statutory conversion. |
FROM THE COURTS | |
| Topic | Recent decisions |
| Incapacity Pensions Universities Superannuation Fund v Scragg High Court, January 2019 | Reversing the Pensions Ombudsman, the High Court decided the scheme trustees are not bound by the University’s conclusion on the member’s incapacity. Wedlake Bell comment: incapacity pensions continue to be a tricky area and legal advice is usually essential. |
| Pension increases Coats UK Scheme v Styles High Court, January 2019 | Reversing the Pensions Ombudsman, the High Court held the pension increases granted were valid. The High Court based its decision on the combined effect of section 68 Pensions Act 1995 and the Registered Schemes Regulations 2006. This is a useful look at these provisions. |
| Trustees duties – interface with employer KeyMed v Hillman High Court, March 2019 | Alleged abuse of their position by Directors of a company (the Directors were also scheme trustees). The High Court decided in the circumstances the Trustee owed the employer no fiduciary duty and merely a duty to consider their interests. Wedlake Bell comment: the leeway given to the trustees by the Court in this case was wide – trustees should tread carefully in considering employers’ interests. |
| Sex equalisation: retrospective levelling down Safeway Ltd v Newton Advocate General’s Opinion, March 2019 | Reference by the Court of Appeal to the European Court. In his Opinion the Advocate General states EU law precludes levelling down, even if levelling down would be permitted under UK law considered in isolation. It remains to be seen whether the European Court agrees with the Advocate General when it makes its decision in a few months’ time. |
| Tax: whether “just and reasonable” to excuse member from tax charge Franklin v HMRC First Tier Tax Tribunal, April 2019 | A member’s honestly held belief about the tax effect of pension scheme loans was not on the facts reasonable, and therefore the member could not be exempted from the unauthorised payments tax charge. |
| Section 75: employer debt claimed from all participating employers PS v China Shipping High Court, March 2019 | As the High Court decided the scheme was not segregated (divided into separate legal sections), all the participating employers were liable for the section 75 debt of an exiting employer. Permission to appeal to the Court of Appeal has been applied for. Wedlake Bell comment: it is good the Courts are grappling with the true meaning of the segregation provisions of the Employer Debt Regulations. |
| Validity of increases BIC UK v Burgess Court of Appeal, May 2019 | Despite many seemingly good arguments, the Court of Appeal unanimously decided that failing to comply with the scheme’s amendment formalities meant that the pre-1997 pension increases awarded could not stand. Please see Clive’s full article in the May 2019 edition of Pensions Compass |
FORTHCOMING COURT DECISIONS | |
| Topic | Effect |
| Trustee’s power to award increases British Airways Supreme Court | The BA scheme trustees have announced settlement terms with BA, subject to Court approval to be sought in July 2019. If the High Court approves settlement terms, the appeal to the Supreme Court will not take place and this litigation will come to an end – no doubt a relief to the participants but unfortunately not definitively settling legal duties of employers and trustees under DB schemes. |
| Tax: deductibility of in specie contributions Sippchoice v HMRC May 2019 | First Tier Tribunal decided the member’s transfer of shares to his SIPP was a tax deductible contribution. HMRC’s appeal to the Upper Tier Tribunal is due for hearing in late May. |
| Tax: HMRC revoking taxpayer’s Fixed Protection Certificate Hymanson v HMRC Upper Tribunal (date awaited) | In a key test of HMRC’s powers, the taxpayer successfully argued in the First Tier Tribunal that his continued pension contributions were mistaken and could be rescinded, thereby keeping his Fixed Protection intact. HMRC has been given permission to appeal to the Upper Tribunal. The principle at stake here is important – when can a transaction be ignored for tax purposes and unwound on the basis the taxpayer did not understand the tax consequences. |
| TPR Financial Support Directions Granada v TPR (Box Clever case) Court of Appeal | The extent of TPR’s powers to issue Financial Support Directions in the context of joint ventures. This long running litigation explains why the Government is keen to streamline the FSD legislation as proposed in the Government’s Statement in February 2019 “A Stronger Pensions Regulator”. |
| Discrimination – equalisation of women’s state pension ages High Court, 5 and 6 June 2019 | Judicial review of Government’s method for increasing State Pension Age for women from 60 to 65. |
| RPI/CPI BT Telecommunications v BT Pension Trustee Supreme Court (date awaited) | The scheme rules permitted switching of the index for pension increases where the existing index “becomes inappropriate”. In October 2018 the Court of Appeal decided RPI had not become inappropriate. A hearing date for BT’s appeal to the Supreme Court is awaited. |
| GMP sex equalisation – Consequentials Hearing High Court (date awaited) | Last but not least: the High Court in its decision in the Lloyds Bank case in October 2018 (can be found on page 6, Pensions Compass, January 2019) stated that various important ancillary matters would be decided at a further hearing known as the “Consequentials Hearing”. These matters include the treatment for GMP equalisation purposes of transfers to and from schemes and the circumstances in which trustees can for administrative simplicity/cost reasons not completely iron out the effects of GMP inequality. No date has been set for the Consequentials Hearing. |
OTHER MATTERS | |
| Topic | Effect |
| GMP equalisation – tax aspects | HMRC has convened an industry working group to assist it in resolving the tax treatment of extra member payments relating to GMP sex equalisation, see generally the Lloyds Bank High Court decision mentioned above. Tax uncertainty and the outstanding Consequentials Hearing are two difficulties schemes face in implementing GMP equalisation. |
| Polite reminder on Auto-Enrolment | The employer’s full contribution rate of 3% of band qualifying earnings came into force on 6 April 2019, taking the total minimum contribution to 8%. |