Clive Weber, Partner, Pensions & Employee Benefits Team. Please contact Clive with any queries on this Ready Reckoner.
| PARLIAMENT | ||
| Recent Legislation | Date | Effect |
| Statement of Investment Principles – Investment Disclosures (SI 2018/988), as amended by Investment Disclosures (SI 2019/982) | 1 October 2019 (part) and 1 October 2020 in full | By 1 October 2019, Trustees to have clarified 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) save for schemes with less than 100 members, stewardship matters (see below). Additional matters to be included in SIP: · Incentivisation of investment managers · Remuneration of investment managers · Additional items for annual reports of DB schemes re stewardship and engagement policy |
| Investment Consultancy and Fiduciary Management Order (made by Competition and Markets Authority) (“CMA”) | Made 10 June 2019, into effect 10 December 2019 | The CMA’s report found weaknesses in the investment advisory market to the potential detriment of schemes, resulting in the CMA Order to put matters right. Reflecting this, the DWP on 29 July 2019 published for consultation until 3 September 2019 draft Regulations amending the Scheme Administration Regulations. The draft Regulations introduce definitions of Investment Consultant and Fiduciary Manager services. The Order and the proposed Regulations introduce new requirements regarding tendering and investment consultancy “objective setting”. Trustees will be required to submit compliance statements. The Government hopes to make the relevant Regulations in the next few months (assuming BREXIT leaves time for this). See generally the Pensions Regulator’s Investment Guidance for defined benefit schemes published on 19 September 2019, only 101 pages long! The Pensions Regulator hints that schemes with less than 100 members should focus to some extent on stewardship matters. Relationship between the CMA Order and the proposed DWP Regulations – please refer to us. |
| Pensions Bill 2019 | Unknown – BREXIT! | This Bill could be included in the Queen’s Speech if the next parliamentary session starts on 14 October 2019. The Bill is expected to cover the following: · Pension dashboards · Collective defined contribution schemes · New offences/penalties where reckless conduct re DB schemes It remains to be seen whether the parliamentary session starting 14 October 2019 will be dominated by BREXIT, leaving no room for other legislation. |
| Proposed Legislation | Date | |
| Prorogation (suspension) of Parliament – ruled null and void by the Supreme Court | Supreme Court decision on 17 September 2019 | As Parliament has remained in session, Bills already introduced continue their progress through Parliament whilst in sesssion, for instance, the Divorce (Financial Provision) Bill (limiting judicial discretion of division of certain pension rights). |
| BREXIT legislation | Unknown – BREXIT! | In relation to pensions and subject to BREXIT occurring, various Regulations relating to pension legislation having been passed e.g. relating to VAT, insolvency and data protection, so that UK pensions legislation can operate effectively if and when the UK exits the EU. |
| GMP equalisation | Unknown – BREXIT! | The DWP’s Conversion guidance published in April 2019 states that any need to find a comparator in the context of equality claims for inequalities arising from GMPs will be removed by legislation – not clear when these Regulations will be made. |
| FROM THE COURTS | |
| Topic | Recent decisions |
| Discrimination McCloud, and Sergeant 27 June 2019, Supreme Court | The Supreme Court refused the Government’s application for permission to appeal the Court of Appeal ruling. The case relates to the defence of “objective justification” in age discrimination (context: changes to Judges’ pensions (McCloud) and Firefighters pensions (Sergeant)). |
| Loss of Fixed Protection – law of mistake HMRC v Hymanson June 2019 | In June 2019, HMRC withdrew its appeal to the Upper Tax Tribunal. The First Tier Tax Tribunal decision stands – the taxpayer’s Fixed Protection is valid notwithstanding his payment of pension contributions to other pension arrangements after claiming Fixed Protection. |
| Persuading workers to opt out of Auto-enrolment – level of fine TPR v Workchain Limited 31 July 2019 | The Court of Appeal, Criminal Division, reduced the fine on the recruitment agency, Workchain Limited, from £200,000 to £100,000. (Workchain pleaded guilty to unauthorised access to computer material contrary to the Computer Misuse Act 1990. The company’s directors had instructed staff to do whatever was necessary to persuade workers to opt out of auto-enrolment. The Court of Appeal took into account that otherwise the company had a record of good compliance). |
| Liability of non UK Guarantor of PPF Type A Guarantee Pelikan AG v Caribonum Pension Trustee 21 June 2019, High Court | In a rare case involving Pension Protection Fund ‘Type A’ Guarantees, the High Court decided that the Swiss Guarantor was liable under the Guarantee, notwithstanding a Swiss legal opinion. WB comment: any PPF or other Guarantee of pension scheme obligations is a legal minefield and our Pensions and Banking Teams are experienced in this area and can assist. |
| Amount of financial loss where SIPP operator delayed in making a transfer Tenconi v James Hay Partnership 12 June 2019, High Court | The High Court ruled the Pensions’ Ombudsman approach was incorrect: investment loss to the member due to the SIPP operator’s slowness in making the transfer was potentially recoverable. WB comment: with all the procedural problems around transfers, this decision is a wake-up call to SIPP operators and administrators to speed up the transfer process. |
| Victory for TPR – long period of look back for Financial Support Directions Granada v TPR (Box Clever case) 20 June 2019, Court of Appeal | The Court of Appeal has decided what approach is “reasonable” for TPR to take, including that on the facts TPR could rely on historical matters occurring before Pensions Act 2004 came into force. The Court of Appeal also confirmed TPR’s conclusion that the targets against whom Financial Support Directions were sought were liable as “associates” of the joint venture employers. |
FORTHCOMING COURT DECISIONS | |
| Topic | Effect |
| Sex equalisation: GMPs Lloyds Bank case High Court | The ‘consequential’ hearing on the question of transfers out will be heard in April/May 2020, following the High Court judgment in late 2018. Hopefully, the Court will clarify how GMP equalisation works in the context of transfers out. Meanwhile, on 30 September 2019 the Pension Industry Working Group published a guidance note putting forward “good practice” suggestions for schemes seeking to achieve GMP equality. |
| Sex equalisation: retrospective levelling down Safeway Ltd v Newton European Court | On 7thOctober 2019 the European Court confirmed that under EU law schemes cannot level down members’ benefits retrospectively to achieve sex equality unless exceptionally there is sufficient objective justification. WB comments: (1) the Safeway scheme’s circumstances are relatively unusual – the scheme did not contain any special protections for members’ past service benefits, nor does section 67 apply as the period in question preceded 6 April 1997; and (2) the European Court has left the door ajar – if the scheme can demonstrate that not retrospectively reducing benefits risks “seriously undermining the financial balance of the scheme” levelling down benefits retrospectively may be possible. The CJEU has sent the case back to the UK Court of Appeal to consider the financial evidence. |
| RPI/CPI BT Telecommunications v BT Pension Trustee | In December 2018, the Court of Appeal decided that RPI had not ceased to be published or become “inappropriate”. It seems the Court of Appeal’s decision stands, as we understand the Supreme Court has refused BT permission to appeal. |
| Section 75 employer debt PS v China Shipping | The High Court decided in March 2019 that the scheme was not divided into separate legal sections for section 75 purposes. The appeal to the Court of Appeal is due to be heard in March 2020. |
| Trustee powers British Airways | The Scheme Trustees’ appeal to the Supreme Court did not proceed. Instead, BA and the Scheme Trustees have agreed settlement terms subject to Court approval. On 28 to 30 October 2019 the High Court will consider whether to approve the settlement. |
| Pension increases Britvic v Britvic Trustees High Court | Britvic is asking the High Court to rule on several matters relating to how the scheme rules apply to increases. The High Court hearing is due early in 2020. |
| SIPP scheme operator – due diligence re member investments Berkeley Burke | The SIPP operator (Berkeley Burke SIPP Administration) is appealing against the High Court decision dismissing Berkeley Burke’s application for judicial review of the Financial Ombudsman’s decision. The case revolves around the degree of due diligence appropriate where customers invest in unregulated collective investment schemes. The appeal hearing is due to take place on 15 October 2019. |
| LGPS – Government Guidance on investment matters R.V. Secretary of State for Communities and Local GovernmenT | The Court of Appeal and High Court both decided that the relevant part of Government Guidance was not contrary to EU legislation. Permission has been granted to appeal to the Supreme Court, date for the appeal awaited. |
| Inheritance Tax HMRC v Parry (the Staveley case) Appeal to Supreme Court | This long running case, on the IHT legislation in the context of pension transfers, is due to be heard in the Supreme Court on 31 October 2019. |
| Contributions in specie Sippchoice v HMRC Upper Tax Tribunal, February 2020 | The First Tier Tax Tribunal agreed with the taxpayer that his in specie contributions to his SIPP were tax deductible. HMRC’s appeal to the Upper Tax Tribunal will be heard in February 2020. |
| Limits on PPF compensation Bauer Final decision of the Court of European Justice | On 8 May 2019, the Advocate General’s Opinion supported the claimant in relation to proceedings under German law. The AG’s comments cast doubt on the validity of the compensation limits under the UK’s Pension Protection Fund. The final decision of the Court of European Justice is expected during 2020 and will have effect irrespective of BREXIT, the proceedings already being underway. |