Welcome to this, the final edition (for 2015 at least) of our popular pensions-related Bulletin.
Team news
As a starter for ten, I should like to offer a few words of congratulations to my fellow partner Justin McGilloway. As well as recently becoming a father for the third time, Justin succeeded my namesake Clive as Team Leader with effect from 1 September. As at the time of writing a full 87 days into his reign, we are all still standing (as is Justin!) and already benefiting from the youthful enthusiasm that he is bringing to the role.
Justin tells me candidly that he is honoured to have succeeded to "the team that Clive built" and I am sure you will join me in wishing him all the very best for this exciting opportunity. As for Clive, who has now been at Wedlake Bell for over 40 years and has the distinction of being amongst the first dozen specialist pensions lawyers in the country: well he is still very much alive and kicking (and even relishes being free of management responsibilities), and will I am sure be around for quite a few years yet!
Another warm welcome should be extended to Emily Matthews, the new trainee solicitor in our Pensions & Employee Benefits team. Training to be a lawyer involves four six-month 'seats' in different legal departments (on, if you like, a supernumerary basis) and Emily joined the firm, and the team, back in September. A pensions seat is quite a challenging introduction to the legal world but she has acquitted herself well and I know that a number of clients are already having the pleasure of dealing with her. Emily's literary legal career now launches with an interesting, insightful and incisive exposé of the Pensions Ombudsman's determination in Brackley, with a small amount of assonance and alliteration thrown in for good measure.
Thanks, George!
Yesterday saw the Chancellor's Autumn Statement, which was – thankfully – devoid of too much breaking news for the pensions world to grapple with. Such developments as there have been are covered in Clive's regular "ready reckoner", but it is fair to say that we can look forward to an element of temporary respite from the seismic shifts in the pensions landscape that the Government has bestowed upon us in recent years.
But there will be more where that came from. Points arising from the Autumn Statement that we can look forward to in the future include
- Pensions tax relief: still 'up for grabs', with the Government considering its position: more can be expected in the full Budget, expected to be March or April next year
- Auto-enrolment contribution rates: increases currently due to take place in October will be pushed back to the following April, to align with tax years: most immediately this means that the October 2017 increases (employers: 1% up to 2%, and employees: 1% up to 3%) will not now take place until April 2018)
- Secondary annuity market: the Government still intends to press ahead with its bold plan to allow those who have already bought an annuity to 'cash it in' for real money, with further details anticipated to be published very shortly
as well as more run-of-the-mill changes, not worthy of their own bullet point, relating to matters such as the inheritance tax implications of taking a DC fund as drawdown; 'bridging pensions' in light of increases to the State Pension Age; and the continued growth of salary sacrifice arrangements. Despite the current tranquillity we certainly do still live in interesting times!
In this edition (or not, as the case may be)
Returning to the present, other topics covered in this edition include:
- The recent High Court decision in the Barnardos case, which involved a judicial assessment of whether that scheme's rules allowed its trustees to properly switch from RPI to CPI as the measure for inflation-proofing pensions in payment and deferred benefits, about which Justin will say a few words;
- A look at recent developments in the same-sex arena, courtesy of our team's senior associate Alison Hills, which culminated in the decision of the European Court in Walker v Innospec; and
- The Government's rejection of the Law Commission's recommendations into the ethical investment conundrum, and the extent to which investing other than with entirely financial aspirations is consistent with a fiduciary's duties to act in the best interests of his beneficiaries.
And then there are a few things that we haven't been able to include, but which nonetheless deserve a brief mention here:
- Moral hazard -The Pensions Regulator's most recent "section 89" report, relating to the Docklands Light Railway pension scheme, explains the manner in which it exercised its regulatory powers. These reports are well worthy of study as they illustrate, ten years on, just how the Regulator will put its anti-avoidance powers into action should it need to. Here, TPR made it very clear here that, whilst it would fully support trustees who were facing difficulties in reaching an agreed position with their scheme's sponsoring employer, it did expect trustees to make full use of their own legal powers (such as a unilateral 'employer contribution rule') first, before asking the Regulator to step in and 'take a position' on their behalf.
- Data protection -The recent pronouncement of the European Court that the US–EU Safe Harbour Framework,as approved by the European Commission back in 2000, is invalid. From a data protection perspective this means that the efficient transfer of personal data between the UK and US is less easy to achieve, and it can no longer be taken as read that sufficient privacy protections exist. This will have a potentially dramatic impact on any data controller, such as a pension scheme trustee board, whose administration function is off-shored (particularly if subcontracted-out by the appointed administrator) to countries outside the jurisdiction.
- Refund of surplus -The deadline for trustees to issue member notices under section 251 Pensions Act 2004, if employers wish to retain their ability to take a refund of surplus from an ongoing pension scheme, is in reality 31December 2015: three months' notice must be given to members before passing the substantive resolution to retain such a power, and any such resolutions must be passed by no later than 5 April 2016. And in passing please don't forget two important quirks of s251: first, scheme employers must be sent a copy of the notice at the same time that it goes to members; and secondly, because the power being preserved relates to taking surplus refunds from ongoing schemes, it will be needed when (and hence any resolution must cover the situation whereby) a surplus refund is paid as a consequence of a partial wind-up of a section of a scheme, where the remainder of that scheme will continue to exist.
- GMP reconciliation -With the abolition of DB contracting-out, HMRC is winding down its 'scheme reconciliation service' from April 2016, with a view to closing it entirely as from April 2018. Whilst schemes have until this later deadline to reconcile their GMP data, they need to register by April 2016 to be able to continue to use HMRC's reconciliation service. We intend to cover this in a little more detail in January's Bulletin; but in the meantime, trustees should remain alive to this looming deadline and – in order to retain any say they may have about the contracted-out liabilities that their scheme might hold – register with HMRC before they forget!
And on that note, may I take this opportunity to extend to you – from the entire team here at WB – all best wishes for the festive season ahead. We shall look forward to seeing you in 2016.
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