UK: Pensions Ready Reckoner - May 25, 2016

Last Updated: 1 June 2016
Article by Clive Weber

Key recent developments in occupational pension schemes.

Parliament

Statutes

Status

Content

Finance Bill 2016

Second reading in House of Commons took place on 11/04/2016

Reduction in Lifetime Allowance to £1 million from 06/04/2016 subject to rights to elect for protection (in force under special procedure).

Pensions Bill 2016

 

  • Governance of Master Trusts
  • Cap on early exit charges and removal of unreasonable barriers for those wishing to flexibly access their benefits
  • Merger of Pensions Advisory Service,, Pensions Wise and the pension services offered by MAS

Lifetime Savings Bill 2016

 

Framework for LISAs.

Bank of England and Financial Services Act 2016

Royal Assent 04/05/2016

Requirements for financial advice for individuals considering selling their annuities on the secondary annuity market – see full article in this Bulletin.

Generally

From on or about 6 April 2016

Following legislation has come into force:

  • Abolition of DB contracting-out
  • Reduction in annual allowance and taper of allowance for high earners
  • Amendments to PPF entry Regulations (non-UK sponsors)

Consultations

Secondary Annuity Market from April 2017

April 2016 Consultations issued by FCA, Treasury and HMRC

New regulatory and tax rules for the secondary annuity market, dealing with position of annuitants, insurers and other participants. Interestingly, and contrary to the Autumn Consultation, the Government has decided to include annuities held in the names of scheme trustees (both DB and DC) and payable to particular members as annuities – see the full article in this Bulletin.

GMP equalisation

January 2012 Consultation

In April 2013 the Government issued an interim response saying it intended to make the Regulations in due course – Regulations not made to date.

EU

Topic

Progress

Data Protection

The final text of the EU's new General Data Protection Regulation was published in its Official Journal on 12 May 2016. The new provisions make significant changes to data law and will affect organisations processing personal data. Penalties for non-compliance are high. There is a two year "sunrise" period for organisations to meet the new requirements.

From the courts - Many appeals pending!

Topic and case

Status

Comment

VAT

Airtours v HMRC

Case heard February 2016 in Supreme Court. Judgment given 11 May 2016.

May impact on HMRC's approach to tripartite contracts between employers, trustees and third party providers. PWC provided a financial report on Airtours finances to Airtours bankers and Airtours sought to reclaim VAT on the costs of the report which Airtours paid. HMRC refused the claim on the basis that PWC supplied its services to the bank and not to Airtours. By a majority of 3 to 2 the Supreme Court has upheld HMRC's view.

Pension rights on bankruptcy

Horton v Henry

Court of Appeal hearing on April 2016

Whether the individual's trustee in bankruptcy can force the individual to exercise the option to crystallise his pension policy so that the value can be obtained by the individual's creditors. The High Court decided in December 2014 that the trustee in bankruptcy could not force the individual to do so and the trustee in bankruptcy is now appealing.

Group indemnity re Section 75 debt

Heis v MF Global Services

Court of Appeal hearing due May 2016

Whether the operating company is obliged to indemnify its group service company in respect of the service company's section 75 debt. The trustees argue this is the case under an implied contract governing the provision of seconded staff.

Defective Deeds

Briggs v Gleeds

Court of Appeal, July 2016

Whether some 30 deeds over a 20 year period are defective through not being properly executed, and are therefore legally ineffective.

RPI/CPI

Barnardo's v Buckinghamshire

Court of Appeal, October 2016

  • Whether RPI "replaced" by CPI
  • Whether switch prohibited by section 67 Pensions Act 1995 (members' cross-appeal)

Scope of Trustee's powers

BA v Trustees of BA Scheme

Court of Appeal, October 2016

Whether BA trustees properly (i) conferred upon themselves and (ii) exercised the power to award additional discretionary increases, on Government's switch from RPI to CPI increases .

Employer's duty of good faith:

 

 

(1) Bradbury v BBC

Court of Appeal, February/March 2017

Whether BBC in breach of duty of good faith in providing option for capping salary for pension purposes.

(2) IBM UK v Dalgleish

Court of Appeal, May 2017

Whether IBM acted in good faith in restructuring pension arrangements and, if not, the appropriate remedy.

 Pensions Ombudsman (PO)

Topic and case

Determination

Change in early retirement factors – Mayo 18/03/2016

The member complained that he would have delayed his early retirement had he known that later the same month less generous factors would have been applied resulting in his pension being reduced by some £7,000 per annum.

The Deputy PO decided the member had not been misled. Events happened subsequent to his application which significantly changed the picture and the scheme trustees had acted reasonably.

Pensions Regulator

Topic

Item

DC Governance Code of Practice

TPR has published 6 guides for Consultation. The guides are to accompany the new DC Governance Code of Practice. The draft Code was laid before Parliament on 9 May 2016.

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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