Ready Reckoner – September 2020

21 / 09 / 2020

Parliament
Forthcoming LegislationDateEffect
Pension Schemes Bill 2019-21Royal Assent expected in 2020 or Q1 2021The Bill has completed its House of Lords stages and started in the House of Commons on 16 July 2020.The second reading of the Bill in the House of Commons is due to take place on 7 October 2020. Provisions include new financial penalties and criminal offences for persons recklessly dealing with DB schemes, restrictions on statutory transfers, new funding and investment strategy requirements for DB schemes and pension dashboard provisions and enabling powers to impose trustees’ climate change obligations – please see the “Climate Risk” article in this issue of Pensions Compass.
Finance Bill 2020 – 20216 April 2021 Provisions to enable collective money purchase benefits schemes (introduced by Pension Schemes Bill 2020) to operate as registered pension schemes.
Parliamentary Answer
3 September 2020
2028Increase in minimum pension age from 55 to age 57. State pension age will then be 67.
Governance and Amendment RegulationsHeld up due to COVIDTrustees, fiduciary managers and investment consultants had to ensure practices complied with the Competition & Market Authority Order by 10 December 2019. The proposed pension regulations to amend DWP legislation are awaited.
Investigatory Powers Regulations 2020Laid before Parliament 21 April 2000. Now held up due to COVIDConfer powers on various bodies, including the Pensions Regulator, to obtain telephone and email data, to facilitate combating criminal offences including criminal offences under the Pension Schemes Bill.
Recent Legislation DateEffect
Investment and Disclosure Amendment Regulations 20191 October 2020More detail to be inserted in SIPs on relationship between trustees and investment managers and on trustees’ stewardship policy. Disclosure Regulations amended so that the trustees’ Annual Report says how their stewardship and engagement policy has been applied and new requirement to publish the scheme’s SIP and annual report free of charge on a website.
Finance Act 202022 July 2020Annual Allowance taper relaxed; and safeguarding of certain “protected pension ages” so that entitlement not lost if member re-employed due to COVID in period 1 March 2020 to 1 November 2020.
Corporate Insolvency and Governance Act 202026 June 2020Measures include introduction of Moratoriums, a new type of Restructuring Plan, continuation of certain contracts and changes to wrongful trading law. For impact on DB schemes, please see “Pension deficits regulated” article in our July 2020 Pensions Compass https://wedlakebell.com/part-1-corporate-insolvency-emergency-legislation-pension-deficits-relegated/.
From the courts
TopicForthcoming decisions
VAT on investment management services United Biscuits CJEU Decision due 8 October 2020The Court of Appeal referred to aspects of this case to the CJEU. On 14 May 2020 the Advocate General gave an Opinion that there was no VAT exemption on pensions fund management services provided by non-insurers. We wait to see whether the CJEU will agree, or disagree.
GMP sex equalisation
Lloyds Bank
High Court,
28-30 October 2020
In 2018 the High Court resolved many GMP sex equalisation issues but how GMP sex equalisation impacts on transfers was left open for another Court hearing. That hearing occurred in May 2020 but the Judge now wishes to hear further argument, to take place in the period 28 to 30 October 2020 – slow progress!
PPF compensation
Hughes v PPF
Court of Appeal?
The PPF and DWP have applied for permission to appeal the High Court ruling in June 2020 that the PPF age
cap is invalid and as to the High Court’s decision on the PPF’s methodology. Please see the ‘Hughes v Pension Protection Fund” article in this issue of Pensions Compass.
Incorrect amendments?
Axminister Carpets
High Court, March 2021
Whether Rule amendments valid, including the effect of the absence of confirmation (under Section 37 Pension
Schemes Act 1993) that the ‘reference scheme’ contracting-out test would be met notwithstanding the
amendments.
Incorrect amendments?
Mitchells & Butlers
High Court, June/July 2021
Whether an amending deed containing fundamental changes is contrary to the scheme amendment power.
Recent Court Decisions
TopicEffect
FCA authorisation of introducers of SIPP business
Adam v Options
High Court May 2020
High Court held that the actions of the SIPP introducer fell short of arranging and advising on investments which is an FCA regulated activity (may be appealed).
FCA authorisation
FCA V Avocode Ltd
High Court June/August 2020
High Court decided that two unregulated pension introducer companies were in breach of Regulation 19 of the Financial Services and Markets Act 2020.
Investment loss on slow transfer
Mr T
Pensions Ombudsman,
12 August 2020
In 2018 the Pensions Ombudsman (“PO”) decided that although the trustees delay in making a transfer was maladministration, the investment loss was not foreseeable and could not be measured. In 2019 the High Court disagreed and directed the PO accordingly. In August 2020 the PO decided that, absent the delay, the member’s transfer value would have been invested in the FTSE 100 and the PO quantified the investment loss at £43,700 which he awarded.
Pension transfers and inheritance tax
HMRC v Parry
Supreme Court, 19 August 2020
Whether pension transfers between schemes made by members in ill-health can be “gifts” for inheritance purposes remains a live issue. The Supreme Court decision in HMRC v Parry throws some light on this, albeit the case relates to legislation no longer in force. Wedlake Bell’s Pension and Private Client Teams have considerable experience in this area. Please see the “Transfers: IHT trap?” article in this issue of Pensions Compass https://wedlakebell.com/part-4-transfers-inheritance-tax-trap/
Rectification
SPS Technologies
High Court, 11 September 2020
Another successful application for rectification (correction) of scheme Rules, by the “quick” summary judgment route. Please see the article “Rectification of errors in your scheme documents” in this issue of Pensions Compass https://wedlakebell.com/part-2-rectification-of-errors-in-your-scheme-documents-univar-v-smith/
Increase in female State Pension Age (SPA)
R (Delve) v Secretary of State for Work & Pensions
Court of Appeal,
15 September 2020
Successive Pensions Acts increased women’s SPA from 60 to 65 over the period April 2010 to 2020, and subsequently to age 66, rising to age 68. The High Court held the changes were not age discriminatory. The Court of Appeal has unanimously upheld the High Court’s decision.
The Road Ahead
TopicEffect
DWP Consultation on Climate Risk – closes 7 October 2020Consultation on proposals to require trustees of larger schemes to have improved governance and reporting re climate risks, including disclosure along the lines of the recommendations of the Task Force on Climate-related Financial Disclosures – please see the article entitled “Climate Risk Governance and Reporting for Pension Schemes” in this issue of Pensions Compass https://wedlakebell.com/part-1-climate-risk-governance-and-reporting-for-pension-schemes-things-are-heating-up/
HM Treasury on tax relief administration – closes 13 October 2020Low earners may end up in different positions depending on the scheme’s method of pensions tax relief: lower earners on net pay versus lower earners in relief-at-source arrangements. The Consultation seeks ways to address this.
Financial Guidance Authority Consultation on advising on DB to DC transfersConsultation closed on 4 September 2020. The FCA is expected to issue its finalised guidance in Q1 of 2021.
Pensions Regulator Consultation on funding standards and on revised DB funding Code of Practice This Consultation is in stages and is linked to the funding and investment strategy provisions of the current Pension Schemes Bill (see under “Parliament” in this Ready Reckoner). The Consultation includes the Pensions Regulator’s new concepts of ‘Fast Track’ and ‘Bespoke’ approaches to regulatory sign off of funding arrangements – a distinction criticised by some. TPR does not expect its new Code of Practice to come into force until late 2021 at the earliest.
Pensions Regulator – Updating of COVID-19 guidance
16 September 2020
The Pensions Regulator sets out its timetable for schemes to resume normal reporting. One hopes this is not premature- fingers crossed.
Other Matters
TopicEffect
HM Treasury Consultation on Reform of Retail Prices Index Methodology The Consultation closed on 21 August 2020. The Government and the United Kingdom Statistics Authority are expected to respond this Autumn. Please see the article entitled “DB Schemes – abolition of LIBOR and possibly RPI” in February 2020 of Pensions Compass https://wedlakebell.com/db-schemes-abolition-of-libor-and-possibly-rpi/
DB pension transfer advice Royal London and consultants LCP’s joint paper published in September 2020 highlights the likely increasing shortage of high quality advice due to increasing regulatory obligations and other factors.