The Supreme Court has today given its judgment in Houldsworth v Bridge Trustees on the interpretation of the phrase "money purchase benefits" under pensions legislation.
The key questions decided by the Court (upholding the decision of the Court of Appeal) were:
- benefits subject to a guaranteed rate of return can still be considered to be money purchase benefits; and
- where money purchase pots were used to provide pensions from the scheme, rather than to purchase annuities from an insurer, the conversion process did not mean that they ceased to be money purchase benefits.
The Government has immediately responded saying that it is considering the implications of the case carefully as it "will result in some schemes being regarded as providing money purchase benefits under the current legislation, even if it is possible for funding deficits to arise in respect of those benefits". Such schemes would be outside the scope of the funding regime, section 75 (employer debt), the PPF and the Financial Assistance Scheme and could potentially face problems with the distribution of assets on a winding-up.
The Government intends to introduce amending legislation as soon as possible with the intention "that the legislation will have retrospective effect at least from the date of the judgment. The legislation will make it clear that benefits cannot be regarded as money purchase benefits if it is possible for a funding deficit to arise in respect of any of those benefits. The Government will consider transitional protection in respect of events occurring between the date from which the legislation is effective and the date of this statement if, for example, this retrospective change would have adverse consequences for individuals."
It seems likely that such amendments will be in the
Pensions Bill which is currently expected to be enacted later this
year. The impact that any amendment will have will depend very much
on the form it takes but may mean that schemes or sections of
schemes which have never previously had to comply with the scheme
specific funding regime or the PPF levy requirements may need to do
so in the future.
A copy of the judgment can be found here.
A copy of the Government's statement is here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 27/07/2011.
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