Pensions Ready Reckoner
Clive Weber, Partner, Pensions & Employee Benefits Team. Please contact Clive with any queries on this Ready Reckoner.
| PARLIAMENT | ||
| Recent Legislation | Enacted | Effect |
| Data Protection Act 2018
|
23/05/2018
|
Enacts the EU General Data Protection Regulations, including permitted changes and post Brexit provisions for data sharing. |
| Data Protection (Charges and Information) Regulations 2018 | 10/04/2018 | Data Controllers to pay fees to Information Commissioner and to supply the Commissioner with specified information. |
| Contracting-out Regulations re bulk transfers of members, 2018 | 26/02/2018 into force 06/04/2018 | Facilitates bulk transfers of members with contracted-out rights without their consent, to schemes that have never been contracted-out. |
| Preservation of Benefit Regulations 2018 | 22/02/2018 into force (mainly) on 06/04/2018 | Simplifies bulk transfers between DC schemes and extends charge cap protections to members transferred without consent. |
| Appropriate Independent Advice Regulations, 2018 | Into force 06/04/2018 | Extra ‘risk’ warnings for transfers of certain types of DC benefits with DB element. |
| Finance Act 2018 | 06/04/2018 | New HMRC scheme registrations to be through only active companies. |
| PARLIAMENT | ||
| Forthcoming legislation – future effective dates | Effective Date | Effect |
| Pension Schemes Act 2017 | Majority of provisions come into effect on 01/10/2018 | Regulation of master trusts. |
| Amendments to Pension Schemes Act 1993 sections 93 to 101 re statutory right to transfer | 01/10/2018 | To help prevent pension scams, the statutory right to transfer is to be tightened regarding permitted recipient pension schemes. |
| Multi-Employer Pension Schemes Bill – Private Member’s Bill | Second reading due 26/10/2018 | The Bill seeks to ease the Section 75 debt burden on unincorporated employers. However, it seems the Government considers the present legislation sufficiently flexible (including the debt deferral provisions which came into force on 06/04/2018) so this Bill is unlikely to progress. |
| Financial Guidance and Claims Act 2018 | Royal Assent 10/05/2018, expected operational date Autumn 2018 | The new publicly funded guidance service combining the Money Advice Service, Pensions Advisory Service and Pensions Wise is expected to operate from Autumn 2018. |
| Divorce (Financial Provision) Bill | Second Reading 11/05/2018 | The Bill is aimed at limiting judicial discretion on divorce by specifying equal division as the fair starting point for property and pensions acquired by a couple after marriage as equal division. |
| FROM THE COURTS | |
| Topic | Recent decisions |
| Exercising Trustee powers
British Airways v British Airways Trustees Court of Appeal 05/07/2018 |
The Court of Appeal has decided in favour of BA, reversing the High Court’s decision in May 2017. WB comment: a very important decision on the exercise of Trustee powers – please see the detailed article in this issue of Pensions Compass. |
| Entitlement to widowed parent’s allowance (“WPA”)
McLaughlin Supreme Court 30/08/2018 |
In these Judicial Review proceedings, the Supreme Court by a 4 to 1 majority decided that the relevant provisions of the Northern Ireland legislation were incompatible with the European Convention of Human Rights, and so the WPA was payable.
|
| HMRC: loans as unauthorised payments – tax charges
Bella Figura Ltd v HMRC First Tier Tax Tribunal 20/06/2018 |
This First Tier Tribunal decision underlines the complexity of the tax assessment rules. HMRC’s power to issue ‘discovery’ tax assessments where HMRC are outside the usual time limit does not, according to this First Tier decision, apply to the “scheme sanction charge”. Here the scheme had made “unauthorised payments” namely loans in breach of regulations. The Tribunal decided that scheme sanction charges had not been included within Section 29 Taxes Management Act 1970 by amendments made by the 2005 Tax Assessment Regulations – this meant HMRC could not use “discovery” assessments to impose a scheme sanction charge.
The above finding prevented HMRC taxing one of the loans. The Tribunal found that other loans made and taxed under ordinary tax assessments were taxable. The taxpayer argued the relieving provisions of section 268 FA 2004 applied as it was reasonable of the taxpayer to believe the loans were not taxable and it was just and reasonable to relieve the taxpayer of the tax charges. The First Tier rejected both arguments and upheld the scheme sanction charges on these other loans. |
| HMRC: circumstances in which scheme sanction charge can be discharged under section 268 FA 2004
Crossfield v HMRC First Tier Tax Tribunal 20/06/2018 |
Unauthorised loans were made by the pension scheme. In this further section 268 case (see also the Bella Figura decision mentioned above), the First Tier Tribunal examined whether the trustee’s belief that the loans were in order was reasonable and concluded it was not. The Tribunal also concluded that the taxpayer had not shown it would be just and reasonable to discharge the scheme sanction and other tax charges. The Tribunal emphasised that the test for applying the relieving provisions of section 268 is strict; the purpose of the scheme sanction charge is to recoup tax relief given on contributions to a scheme where those contributions have in effect been used for purposes other than that for which tax relief was given – here the contributions were used by the scheme to make unauthorised loans. |
| “Worker” classification
Pimlico Plumbers v Smith Supreme Court 13/06/2018 |
The Supreme Court considered whether on the particular facts the individual plumber, Mr Smith, was self-employed (as Pimlico Plumbers contended) or was an employee or worker under the Equality Act. It decided Mr Smith was a ‘worker’ and therefore had certain rights under the Equality Act. OUR COMMENT: although these cases tend to be fact specific, the Supreme Court’s views on the tests to be applied are of interest, including in the context of the duty to auto-enrol. |
| TPR’s powers
Fit and proper person to be a Trustee – civil or criminal standard of proof? McLarry v TPR Upper tribunal of High Court 16/07/2018 |
Under Pensions Act 2004 TPR has power to prohibit a person from being a trustee where they are not a fit and proper person. TPR alleged the 2 trustees had acted dishonestly and without integrity. The trustees argued the criminal standard of proof should apply – beyond reasonable doubt – and not the civil standard of balance of probabilities.
The Upper Tribunal decided, in line with the FCA’s power to prohibit persons acting, that the correct standard of proof was the civil standard of balance of probabilities. |
| FROM THE COURTS | |
| Topic | Forthcoming important decisions |
| Sex equality – GMPs
Lloyds Banking Group High Court |
This GMP equalisation claim by female employees of Lloyds Bank was heard in July 2018 and Judgment is awaited. The issues are whether benefits must be equalised for the effect of GMPs and, if so, how. Whatever decision the High Court reaches, appeals to higher Courts are likely. |
| Inheritance tax and pension transfers
HMRC v Parry (the ‘Staveley’ case) Court of Appeal |
Case heard on 6 and 7 June 2018, Judgment awaited. Whether IHT payable on transfer of pension funds is the issue. ‘Staveley’ is on its own facts but the Judgment is likely to be of general interest bearing in mind the significant increase in DB to DC transfers to access the DC flexi-access regime. |
| FROM THE COURTS | |
| Topic | Forthcoming decisions |
| Discrimination based on disability
Williams v Trustees of Swansea University Scheme Court of Appeal 14/07/2017 |
Supreme Court hearing expected October 2018. Issue: whether in the circumstances using part-time salary rather than full-time equivalent is unlawful discrimination.
|
| Discrimination based on age
Sargeant v London Fire Authority Employment Appeal Tribunal 29/01/2018 |
Court of Appeal Hearing due 5 November 2018. Issue: whether the transitional pension arrangements are discriminatory on grounds of age, or objectively justifiable. |
| Discrimination based on age
Lord Chancellor v McCloud Employment Appeal Tribunal 29/01/2018 |
Court of Appeal hearing due 5 November 2018. Issue: whether transitional pension arrangements regarding certain Judges who were members of the Judicial Pension Scheme are unlawful as age discriminatory and, in some cases, discriminatory on grounds of race and sex discrimination. |
| RPI/CPI
Barnardo’s v Buckinghamshire Supreme Court 11/06/2018 |
Issue: whether the scheme trustees have power to substitute CPI (or some other index) for RPI as the employer contended. The High Court and Court of Appeal (by 2:1 majority) rejected this. The Supreme Court’s decision is awaited. The Supreme Court apparently decided not to hear argument on whether, if there is a power to switch index, exercising the power would contravene members’ subsisting rights under section 67. |
| RPI/CPI
BT Telecommunications v BT Pension Trustee High Court 19 January 2018 |
Yet another RPI/CPI case, this time relating to whether RPI has ceased to be published “or becomes inappropriate”. The High Court decided neither was the case. Court of Appeal hearing due on 9 October 2018. |
| Overpayment of pension
Burgess v BIC UK Ltd High Court 17 April 2018 |
Issues: whether a limitation period applies to limit the past period for equitable recovery of overpayments, and whether a County Court Order is required to enforce such recovery. The High Court considered no limitation period applies but that a County Court Order is needed to enforce recovery. The appeal to the Court of Appeal on both aspects will be heard in 2019. |
| TPR’s anti-avoidance powers
Box Clever (ITV) Upper Tribunal 18 May 2018 |
The Upper Tribunal decided in favour of TPR regarding the scope of TPR’s anti-avoidance powers in the context of joint ventures. ITV’s appeal from the Upper Tribunal’s decision is due to be heard by 11 June 2019. |
| PENSIONS OMBUDSMAN (“PO”) | |
| Topic | Effect |
| Transfer by Police Pension Scheme to another scheme – pension scam
Re Mr N PO Decision 11/07/2018 |
The PO ordered the reinstatement of Mr N’s pension benefits as he considered the failure to carry out adequate checks on the recipient scheme amounted to maladministration. £1,000 awarded to Mr N for his significant distress and inconvenience. |
| Employer’s failure to bring forward retirement date before member’s death
Re Mr Y 26/07/2018 |
In what some may see as a harsh decision, the PO decided that on the facts the employer should have advanced Mr Y’s retirement date so that enhanced death benefits would have been paid on Mr Y’s death. The decision underlines the importance of administrators making a contemporaneous note of telephone calls from members/their family members. |
| DEPARTMENT OF WORK AND PENSIONS | |
| Topic | Effect |
| DWP Consultation on “A Stronger Pensions Regulator” | The Consultation opened in June 2018 and closed on 21 August 2018. New Regulations are likely later this year broadening employer duties to notify TPR of various corporate events. TPR is also likely to revise its Clearance Guidance for transactions. |
| DEPARTMENT FOR BUSINESS, ENERGY & INDUSTRIAL STRATEGY (“BEIS”) | |
| Topic | Effect |
| BEIS Response following Consultation on Insolvency and Corporate Governance | In its response published on 26 August 2018, BEIS proposed amongst other matters to strengthen the framework for paying dividends and to ensure greater accountability of directors in group companies selling distressed subsidiaries – resonating with concerns of trustee boards of DB pension schemes in deficit. However, when if it all, Government will find time to legislate given BREXIT is unclear. |