UK: Pensions Ready Reckoner - November 2015

Last Updated: 1 December 2015
Article by Clive Weber

A recap of the latest developments in the world of occupational pension schemes.





Tax changes from 06/04/2016

The following changes have been enacted in the Finance (No. 2) Act 2015, which received Royal Assent on 18 November 2015

  • Annual Allowance restricted for high earners from 06/04/2016
  • Pension Input Periods aligned with tax years from 06/04/2016

Further tax changes
(to be enacted)

From 6 April 2016 the Lifetime Allowance is due to be reduced to £1 million from the present £1.25 million, subject to the right to elect for protection. There is to be new legislation to ensure that an inheritance tax charge does not arise when a member designates funds for drawdown but does not draw them before his death. The upshot of the Government's wide ranging consultation earlier this year on pension saving and tax relief will be announced as part of Budget 2016.

Single State Pension from 6 April 2016 – end of DB contracting-out

  • Employer power to amend scheme rules within limits came into force on 6 April 2015
  • Trustees should ensure members are informed of cessation of contracting-out (Disclosure Regulations)
  • Scheme rules should be checked in case amendments needed – unclear whether the "schemes that were formerly contracted-out schemes regulations" can be relied on to override scheme rules

Refund of scheme surplus from on-going schemes

  • Schemes containing refund powers should ensure that a resolution under section 251 Pensions Act 1995 (as amended) is passed prior to 6 April 2016. As 3 months' notice to members and employers is required, notice in relevant cases needs in practice to be given before the end of this year.

Pot follows member

Legislation postponed

GMPs – sex equalisation

Government still intends to legislate but timing uncertain


Investment regulations and fiduciary duties

On 12 November 2015 the Government announced that the Investment Regulations will not be amended. This goes against the Law Commission's recommendations. Instead, non-statutory guidance will be issued. For further detail please see our separate article elsewhere in this Bulletin.

Secondary annuity market

In the July 2015 Budget the Government said they intended to introduce new legislation in 2016 to have effect from April 2017 and would issue a further paper in Autumn 2015. They have now indicated that the paper will be issued in December 2015 – watch this space!

Employer debts: changes for non-associated multi-employer schemes

The consultation on possible changes opened on 12 March 2015 and closed on 22 May 2015 since when nothing further has been heard...




Perhaps the most notable feature of the present pipeline of cases is the considerable number of pending appeals to the Court of Appeal.



Bankruptcy and elections for pension
Horton v Henry

Court of Appeal hearing due January 2016 – in the light of the April 2015 pension flexibilities, this is an important forthcoming decision on the entitlement (or otherwise) of trustees in bankruptcy to access members' DC pots.

Employer duties
IBM v Dalgleish

Court of Appeal hearing due before 31 March 2016 – the High Court decision in 2014/15 that IBM were in breach of the duty of good faith, and the court's remedies awarded as a consequence of the breach, are both now being appealed.

Indemnity for section 75 debt
Heis v MF Global Services

Arrangements between group companies including indemnity provisions were, according to the High Court in May 2015, wide enough to include any section 75 debt falling due. The appeal is due to be heard by the Court of Appeal in May 2016.

Defective deeds
Briggs v Gleeds

In July 2015 the High Court held that deeds were legally ineffective as they had not been properly executed. This and other matters, including the meaning of the scheme's alteration powers, are being appealed – due to be heard in the Court of Appeal in July 2016.

Employer's duty of good faith
Bradbury v BBC

Court of Appeal hearing due in May 2016. The High Court had previously decided in May 2015 that the BBC was not in breach of its employer's duty of good faith by imposing a cap on pensionable salary.

Buckinghamshire v Barnardo's

The High Court decided in July 2015 that RPI had not been replaced by CPI and therefore under the wording of the scheme rules the trustee could not switch to CPI. This finding is being appealed. We understand that, if this does reach the Court of Appeal without settling, scheme members will cross-appeal that section 67 Pensions Act 1995 prevents any change in index for past service benefits. In other words, they would be seeking to reverse the High Court's decisions in Qinetiq and Arcadia that section 67 does not apply in circumstances where the "accrued right" is, colloquially speaking, "RPI or some other index".

RPI/CPI, take two
British Airways v Spence

British Airways are seeking to overturn the decision of the BA pension scheme trustees to give themselves power to award discretionary pension increases, following the Government's switch from RPI to CPI for statutory purposes.

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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