Issues affecting all schemes
Data breaches – court decision on compensation
The Court of Appeal has allowed an appeal against the High Court's decision to strike out nearly 400 claims for data protection breaches relating to annual benefit statements being sent to members using out-of-date addresses. The High Court had held that to have a viable claim, each claimant needed to show that they had a real prospect of demonstrating that the statement addressed to them was opened and read by a third party. However, there was no evidence that this had happened.
The Court of Appeal held that:
- Compensation is payable for "non-material damage" resulting from a data protection breach. Such damage would include fears about the possible consequences of the breach if those fears were objectively well-founded.
- There is no requirement for claims to meet a threshold of seriousness.
- While the compensation that might be payable was likely to be modest and to be outweighed by the respondents' legal costs, it was not possible to conclude that the claims as a whole amounted to an abuse of process.
The Court remitted the case to the High Court for it to determine:
- Whether the claimants' fears about the consequences of the data breach were objectively reasonable.
- Whether any individual claim amounted to an abuse of process.
Action Trustees and administrators should keep this area under review. This case could be influential in determining whether compensation is payable where communications are sent to the wrong address by a pensions administrator.
Data protection – ICO guidance
The Information Commissioner's Office (ICO) has published guidance on disclosing documents securely, e.g. in response to a data subject access request, to avoid disclosing hidden personal information. The guidance includes practical steps and how-to videos to help organisations understand how to check documents, including spreadsheets, for hidden personal information and reduce the risk of a data breach.
In addition, the ICO is consulting on draft guidance to support organisations in understanding and applying changes that will be introduced by the Data (Use and Access) Act 2025. The guidance covers:
- Handling data protection complaints – organisations will be required to have a process in place for receiving and handling data protection complaints. The consultation closes on 19 October 2025.
- Recognised legitimate interests – this is a new lawful basis for data processing (it is separate from the existing legitimate interests basis). The consultation closes on 30 October 2025.
Action No action required, but trustees, employers and administrators may find the guidance on disclosing documents securely helpful.
Data security and governance – industry guidance
The Pensions Administration Standards Association has published guidance for schemes on improving data security and governance. The areas covered include:
- Cyber resilience.
- Third-party oversight.
- Secure communications.
- Responsible AI usage.
Action No action required, but trustees and administrators may find the guidance helpful.
Meaning of "children" – court decision
The High Court has held that the word "children" when defining beneficiaries in a trust document included non-biological children. Mr Marcus had two sons, Edward and Jonathan. In 2003, he set up a discretionary trust to benefit, among others, his "children". The trust took effect on his death in 2020. However, unknown to Mr Marcus, Edward was not his biological child. Jonathan argued that Edward should not therefore be considered a beneficiary of the trust.
The court held that while the starting point when interpreting the word "children" should be its natural meaning of biological children, that meaning was capable of being displaced. In this case, the context did displace that meaning, including factors such as the fact that Mr Marcus always thought Edward was his biological son and that Edward was treated for practical, familial and all other purposes as a biological child.
Action No action required, but when determining whether an individual is a beneficiary under the trust deed and rules (e.g. in relation to a lump sum death benefit), trustees should consider whether there are any factors which would displace the natural meaning of words used in the definition of beneficiaries.
Transfers – duty to protect member from tax losses
The Deputy Pensions Ombudsman has partially upheld a member's complaint regarding delays in processing the transfer of two pension policies to a self-invested personal pension scheme (SIPP). The member requested the transfers in June 2021 and informed the scheme that the transfers needed to be completed before he became a Spanish resident on 1 January 2022. If they were not completed by then, he would incur a significant Spanish tax liability on any cash lump sum withdrawals from the SIPP. The transfers were ultimately completed on 22 December 2021 and 20 January 2022.
The Deputy Ombudsman concluded that the scheme did not have a duty to protect the member from tax losses arising due to his change in tax residency nor had it assumed such a duty. While the scheme's delays in processing the transfers amounted to maladministration, the combined transfer value of the two policies at the time of the transfers was higher than the combined value in September 2021 when the transfers should have been made. In addition, the member had not provided any evidence of a tax loss as he had not made any withdrawals from the SIPP. The member had not therefore suffered a financial loss due to the delays. The Deputy Ombudsman directed the scheme to pay the member £500 for the distress and inconvenience caused.
Action No action required.
Pensionable pay – conversion of non-sterling bonuses
The Deputy Pensions Ombudsman has decided that, where a scheme's rules were silent on how bonuses paid in a currency other than sterling were to be converted into sterling for the purposes of calculating the member's pensionable pay:
- A notional bonus amount that was not the actual amount of the bonus paid to the member could not be used.
- A particular conversion rate reasonably determined by the employer's finance department for such purposes would be an acceptable rate to use, provided it was reasonably consistent with published rates at the relevant time. It would also be reasonable to apply either the exchange rate on the date the bonus became payable or on the date of actual payment or an average rate for the relevant month.
Action No action required, but employers should bear the decision in mind when converting non-sterling bonus amounts into sterling amounts for the purposes of calculating a member's pensionable pay.
Issues affecting DB schemes
Virgin Media – details of legislative "fix"
The government has published amendments to the Pension Schemes Bill that set out the proposed legislative "fix" for issues arising out of the Virgin Media case. The legislation provides that an alteration is to be treated as having met the relevant statutory requirements and so as having always been a valid alteration as far as those requirements are concerned, if the following conditions are met:
- The trustees have made a written request to the scheme actuary for the actuary to consider whether the alteration would have prevented the scheme from continuing to satisfy the reference scheme test.
- The scheme actuary has provided written confirmation to the trustees that it is reasonable to conclude that the alteration would not have prevented the scheme from continuing to satisfy the reference scheme test.
There are restrictions on which alterations will be capable of remediation. For more information, please see our legal update.
Action Trustees and employers should monitor the Bill's progress and any government announcements on when the legislation will be brought into force.
Issues affecting DC schemes
DC pension adequacy – role of trustees
The Pensions Regulator (TPR) has called on trustees to consider their decumulation strategies now to deliver better retirement outcomes in light of recent research showing a significant DC pension adequacy challenge. Key points include:
- Trustees should rethink their role, not just as stewards of assets, but as enablers of good retirement outcomes. Generic solutions that resort to basic signposting to products such as drawdown are not sufficient. Trustees must consider how different defaults will suit different types of savers and bring forward plans for simple but tailored support, smarter decumulation strategies, and clearer guidance.
- Trustees should do more to signpost services such as Pension Wise and MoneyHelper early and often, not just at the point of retirement.
- Three steps that trustees can take now in relation to the
adequacy challenge are:
- Engage with members: trustees should understand member goals, gaps, and preferences and use this insight to shape strategies.
- Promote trusted guidance: trustees should make Pension Wise and MoneyHelper part of their core communications.
- Prepare for change: trustees should get ready for dashboards, guided retirement, and a more engaged membership.
In addition, TPR and the Financial Conduct Authority have released a joint podcast on the need for trustees to develop a much deeper understanding of the diverse needs and profiles within their scheme membership to ensure members make the right decisions at retirement.
Action Trustees of DC schemes should consider their response to this guidance.
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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
