UK: Pensions Ready Reckoner - June 17, 2015

Last Updated: 23 June 2015
Article by Kris Weber





Acts of Parliament

DC flexibility from April 2015 for those aged 55 and over

The Taxation of Pensions Act 2014, together with Pension Schemes Act 2015, have introduced DC flexibilities from age 55 onwards from 6 April 2015. Whether DC members can access the flexibilities depends on scheme rules and trustee decisions. Access is by drawdown from the member's "flexi-access drawdown fund", or drawing by lump sums known as "uncrystallised funds pension lump sums". Activating the flexibilities triggers the limited annual allowance of £10,000 for future money purchase contributions. The "lifetime allowance" tax limit continues notwithstanding the new DC flexibilities.

Member communications should be suitably caveated – individuals' options for DC flexibilities depend on what trustees allow.

The legislation provides more favourable tax treatment on death for individuals' DC pension pots and certain annuity funds.

Onerous HMRC reporting obligations are placed on trustees, individuals and DC providers operating the new DC flexibilities.

DC flexibilities


A series of new Regulations and amendments to existing Regulations came into force on 6 April 2015. Notable are:

-       amended Disclosure Regulations;

-       amended Transfer Regulations; and

-       Appropriate Independent Advice Regulations,

as supplemented by TPR's April 2015 Guidance on (1) DC communications and on (2) DB to DC transfers and conversions.

Key points under the new Regulations 

(1) DC members must be given the option of receiving "guidance" on their DC flexibilities from the Government's "Pensions Wise" service. This is a free and impartial service provided by the Pensions Advisory service (telephone guidance) and Citizens Advice Bureau (face to face guidance). It is guidance not advice.

The Treasury will monitor the performance of these services. It is a criminal offence to pretend to be a Government authorised guidance provider.

Quality standards for the "Pensions Wise" service are set out in Rules made by the Financial Conduct Authority ("FCA").

(2) As required under the Appropriate Independent Advice Regulations, DB members seeking DB to DC transfers must first obtain independent appropriate advice from an FCA authorised adviser where the DB transfer value exceeds £30,000. Such advice is recommended where the transfer value is £30,000 or less. The FCA have made new Rules with effect from 5 June 2015, tightening the framework for advisers advising on transfers including DB to DC transfers. The FCA authorised adviser must be a "Pension Transfer Specialist".

Upshot of DC changes


The April 2015 DC changes have a substantial impact on many types of member communications including generic publications such as newsletters and booklets, and communications with individual members such as retirement option packs and benefit statements. Legal review to ensure clarity for members and compliance with the new legislation is recommended.

DC Generally

Changes made by the FCA (DC contract based schemes) and by the DWP (trust based schemes) provide a comprehensive and heightened regulatory regime for DC arrangements:


(1) Rules for "independent governance committees" for DC providers workplace DC pension arrangements have been made by the FCA; and


(2) Regulations covering DC trust based schemes' have introduced new governance obligations (to elect trustee chairs and to produce annual DC scheme governance statements) and caps on certain charges for some DC schemes have been imposed. TPR has issued Guidance on this. 




PARLIAMENT continued



Other developments

GMP sex equalisation


Government remains of the view that GMP sex equalisation is required. However, the draft Regulations published in January 2012 have still not been made. The Government continues to search for a simplified process for GMP sex equalisation. It is thought that draft conversion Regulations may be issued soon.


Introduction of single tier state pension and abolition of DB contracting-out from April 2016 (Pensions Act 2014)


Employers have an overriding statutory power to amend future service accrual / member contributions from 6 April 2016 to help offset the cost of increased National Insurance Contributions. Employers with DB contracted-out schemes open to accrual need to consider the statutory power.


Regulations will be made later in 2015 automatically amending references to certain terms which will no longer apply from April 2016 due to the introduction of the State single tier pension e.g. "basic state pension" used in some scheme rules as a deductible when calculating pensionable earnings.




Staging dates for employers with payroll schemes for 30 or fewer employers started on 1 June 2015 and consist of staggered dates to April 2017. Please see the separate article in this Bulletin.


And also not forgetting possible future legislation:



More tax changes?


Further tax changes look inevitable following the General Election on 7 May 2015. Further restricting the lifetime allowance, and abolition of higher rate tax relief on pension contributions by high earners, are likely candidates. Watch out for the Budget announcements on 8 July 2015.


Other consultations

(1) The DWP "Call for Evidence" in respect of Section 75 debts and multi-employer schemes for non-associated employers closed on 22 May 2015. The Government's reaction is awaited.


(2) DWP consultation on a "Secondary Annuity Market" closes on 18 June 2015. The new Pensions Minister, Ros Altmann is on record as favouring the development of this market.


(3) Enforcement of Family Financial Orders – the Law Commission's consultation closes on 7 July 2015. Query whether pension sharing orders may be permitted in future as a way of enforcing Court Orders made on divorce which have not been complied with.


(4) RPI/CPI – on 15 June 2015 the UK Statistics Authority published its consultation on consumer prices indices. The consultation closes on 15 September 2015. The Authority is expected to take final decisions later this year.








Employer's duty of good faith

IBM v Dalgleish (February 2015)

The High Court's April 2014 decision – see our May 2014 Bulletin – continues to play out. Following the Judgment on 20 February 2015 concerning the remedies for the Employer's breaches of its duty of good faith, the High Court decided further matters relating to the IBM's early retirement policy. IBM are applying for permission to appeal to the Court of Appeal. The saga continues!




Following the PPG case in July 2013, HMRC has issued a series of Briefing notes. HMRC's latest brief, Brief 8/15 issued on 26 March 2015, explains HMRC's requirements in relation to DB schemes and suggests tripartite contracts are needed between suppliers, trustees and employers by 31 December 2015. See the article in our April 2015 Bulletin.


Duty of good faith (again)

Bradbury v British Broadcasting Corporation

The appeal from the 2013 Pensions Ombudsman decision has been heard in the High Court. Judgment was issued on 15 May 2015. The Ombudsman had held that capping salary increases at 1% for pension purposes by a contractual agreement between employer and employee was legally effective on the facts and did not breach the employer's duty of good faith. The High Court upheld the Pensions Ombudsman's decision.



Forthcoming Court decisions:



Execution of documents

Briggs v Gleeds


The appeal is due to be heard by the Court of Appeal in October 2015. The High Court decided that some 20 deeds were incorrectly executed and were thereby legally ineffective.


Same-sex partner benefits

Innospec v Walker

The appeal against the Employment Appeal Tribunal's decision is due to be heard in June or July 2015. The Tribunal upheld the statutory exclusion of pre-5 December 2005 service in calculating the pension for the survivor of a registered civil partnership. The same exclusion presently applies to pensions for same sex marriage survivors.



Horton v Henry

The High Court decided that the trustee in bankruptcy could not, in order to tap into the income payments order, oblige the bankrupt individual to exercise his scheme option to access his pension rights. An appeal has been lodged, due for hearing in January 2016. See our separate article in our February 2015 Bulletin. This is an important topic bearing in mind the increased scope for access to DC pension funds that has existed since April 2015.








This has been a busy period. There have been a wide range of decisions on subjects including pension liberation, options chosen because of inaccurate information and whether trustees are under a duty to alert employers to future section 75 debts. The cases on inaccurate or misleading information are particularly relevant given the great importance of properly communicating the April 2015 changes including the DB to DC transfer facility. Please see the separate article in this Bulletin on the Pensions Ombudsman's decision relating to the Henley Retirement Benefits Scheme.





Two matters of particular interest:

(1) The PPF has issued guidance about how to appeal to Experian on levy scores, in advance of levy invoices being issued in Autumn 2015.

(2) The timing of the legal opinion in connection with re-certification of a charge has been considered by the PPF Pensions Ombudsman. Please see the separate article in this Bulletin.





Contribution notice issued against sole director

On 24 April 2015 TPR issued a contribution notice for £390,000 against a director of the purchaser of Carrington Wire. The context was a sale of this UK company by Russian owners. The sale was not reported to the scheme trustees or to TPR after it had taken place. TPR's Determinations Panel held that preventing recovery of a Section 75 debt from a guarantor was as much "debt avoidance" as an employer itself sidestepping payment of a Section 75 debt.

Suspension of pension trustees

TPR has published, in redacted form, details of suspension of trustees in circumstances where there were concerns about possible improper liberation and lapses of the trustees' investment duties.

Annual funding statement

TPR published its annual funding statement for DB schemes in May 2015. This emphasises the need for an integrated approach to covenant, investment and funding risk. Please see the separate article in this Bulletin for more detail.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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