Most of the EU law related to pension schemes is reflected in UK
domestic law so if and when we leave the EU, this law will remain
in place until any change is enacted.
Much of EU source UK pensions law is sensible and at most should
need minor adjustment. Broadly speaking the following areas are in
this category (but see below re GMPs and sex equality):
Sex discrimination, part
timer claims and age discrimination
Equality Act 2010 and
(Original) Article 119
Treaty of Rome
Equal Treatment Framework
Pensions Act 2004 and
EU IORP Directive
Data Protection Act 1998
The European General Data
Protection Regulation has recently been published and is due to
take effect across the EU from 25 May 2018 – equivalent new
UK law may well be needed.
Other areas of UK law are presently less satisfactory due to the
impact of EU law. For instance, in relation to pension rights
where employees who are members of an occupational pension scheme
are transferred from seller to buyer on a business transfer.
The UK's Transfer of Undertakings Protection Regulations
(TUPE) apply in these circumstances. The
underlying EU Acquired Rights Directive means some additional types
of pension rights transfer under TUPE. This area would
benefit from reform if and when the UK has a free hand.
Some further thoughts:
Transfers from UK registered schemes to qualifying recognised
overseas pension schemes (QROPS) or to qualifying
non-UK pension schemes (QNUPS) – we doubt
whether exiting the EU will impact the UK legislation in these
areas but this remains to be seen; and
VAT Directives: the impact of leaving the EU on HMRC's
present approach to VAT on supplies of services to pension schemes
by third parties and HMRC'S proposed rules re tripartite
contract between employers, trustees and suppliers – Brexit
may lead to HMRC extending the transitional period due to expire on
31 December 2016 and to postponing its proposed tripartite contract
Sex equality: leaving the EU may be an opportunity for the
government to decide that there is no need for sex equality
for scheme members' GMPs (guaranteed minimum pensions).
Commercial impact on sponsors of defined benefit pension
In contrast to Brexit's impact on pensions law, the impact
on business of the Brexit vote may be significant and hence must be
considered by scheme trustees and covenant advisers in assessing
the employer's covenant. The impact will vary from
business to business and may take time to become clear.
Upon the UK's exit from the EU longer term schemes with EU
but non-UK sponsors or guarantors will be more removed from the
reach of UK trustee boards and from the UK Pensions
Regulator. The present EU law on enforcement of cross-border
debts (e.g. a pension debt under section 75, Pensions Act 1995) and
the EU insolvency framework (under the EU Insolvency Regulation)
may cease to be available, leaving parties to operate less
user-friendly cross-border mechanisms.
Scheme assets will in most cases be immediately impacted
positively or negatively by the Brexit vote. The overall
economic forecast has also changed e.g. the long term prospects for
inflation (up?) and interest rates (down?).
Trustee boards should ensure they obtain appropriate
professional advice as to possible/recommended steps. Seismic
events such as the Brexit vote at least require trustees to take
stock in the interests of prudency and to record this in risk
registers, even if it is too early to make changes.
Possible easing of accounting rules – the government's
response to the economic shock of Brexit (e.g. possibly more
quantitative easing) may increase the value of schemes' pension
liabilities. Accordingly the Pensions Minister has stated
that the government is reviewing the rules on how pension schemes
account for their liabilities, so that the stimulating effect of
post-Brexit economic measures is not undermined. Possibly some good
news for pension schemes!
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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