Here is our brief weekly summary of key legal and regulatory developments relevant to occupational pension schemes, which you might have missed, with links for further information.
The Pensions Regulator (TPR) has issued interim guidance setting out its expectations for how defined benefit consolidator schemes (“superfunds”) should operate, including governance standards, funding and capital backing requirements. TPR’s guidance is aimed at those setting up and running a superfund, to provide clarity ahead of legislation which will (eventually) place the authorisation and supervision of superfunds on a statutory footing. TPR plans to provide further information for trustees and employers in the coming months. In the meantime, any employers or trustees who are interested in exploring this option can contact us for further information or advice.
In Hughes and others v The Board of the Pension Protection Fund, individuals who experienced significant reductions to their expected pension benefits as a result of their scheme being taken over by the Pension Protection Fund (PPF), or being in a PPF assessment period, challenged certain aspects of how PPF compensation is calculated. The High Court reached the following conclusions.
The imposition of the PPF compensation cap, limiting the amount of PPF compensation payable to those under normal pension age at the point in time the assessment period begins, constitutes unlawful discrimination on grounds of age. The PPF compensation cap must therefore be disapplied.
The Limitation Act 1980 restricts how far back an individual can look when claiming arrears of pension resulting from underpayments caused by the application of the PPF compensation cap. The PPF can rely on this when refusing to pay arrears in respect of periods before 6 September 2012.
It is for the PPF to decide how it will ensure that the overall compensation payable during retirement (or the lifetime of a survivor) will equal at least 50% of the amount of benefits that the member (or survivor) would have received from the pension scheme (in order to reflect the minimum benefit threshold set by the Court of Justice of the European Union in Hampshire v PPF). It is not necessary for the PPF to conduct an annual assessment comparing the amount of PPF compensation payable against the benefits the scheme would have paid each year.
Members of pension schemes in a PPF assessment period should receive benefits that meet the minimum level required by the Hampshire v PPF judgment.
The PPF has announced on its website that "We’re studying the detail of the judgment carefully to decide our next steps, and will work closely with the Department for Work and Pensions (DWP) to understand how the UK government will respond. While we do so, we’ll continue to pay our members their current level of benefits. The government sets the level of compensation we pay, balancing the needs of members and the needs of our levy payers, so it’s for them to decide how to respond to the part of the judgment relating to the cap".
The Corporate Insolvency and Governance Bill continues its passage through Parliament and is expected to receive Royal Assent shortly. Amendments were considered and approved yesterday which, if they are included in the final form of the Bill, would address many of the concerns of the pensions industry. The proposed amendments introduce a provision that would prevent certain bank debt gaining super priority status and ranking ahead of unsecured pension debt in the event that a sponsoring employer enters an insolvency process within 12 weeks of having exited a moratorium period. Where a company is or has been an employer of a defined benefit scheme, the proposals make provision for TPR and the PPF to be notified of the start of a moratorium period and, where a restructuring plan is under consideration, for TPR and the PPF to receive the same notices as creditors. Our recent blogs on the moratorium process and restructuring plan provide further explanation about the Bill.
The Costs Transparency Initiative has added further tools to its framework in order to assist pension trustees (and other asset owners) to compare costs and charges information from asset managers through the use of standardised information and templates.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.
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