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.
On 16 July 2020, the Court of Justice of the EU (CJEU) delivered a landmark decision on international data transfers – the so-called Schrems II judgment. In its decision, the CJEU invalidated the EU Commission’s adequacy decision on the EU-US Privacy Shield Framework on which thousands of US companies have been relying to lawfully transfer personal data from the EU to the US. For information on how this could affect pension trustees and scheme administrators, see our blog.
The Finance Act 2020 has now received Royal Assent. It does not contain much in the way of pensions tax measures, but trustees may wish to note that the thresholds for the tapered annual allowance have changed retrospectively. In respect of accrual from 6 April 2020, individuals with an adjusted income (broadly speaking, net income plus pension contributions) of up to £240,000 will no longer be impacted. However, for those individuals who continue to be affected, the minimum tapered annual allowance has been reduced from £10,000 to £4,000.
The Pensions Policy Institute (PPI) warns that government intervention is needed to curb the growing number of small deferred pension pots in defined contribution master trusts. The PPI estimates that there could be up to 27 million deferred pots by 2035 – these can be costly to administer and difficult for members to locate and manage. The PPI explores a number of potential solutions, including consolidation through automatic “pot follows member” transfers – a policy that was parked by the government in 2018, as it was “not the right time” (Guy Opperman). We can expect this debate to resurface.
In 2019, same sex spouses and same sex civil partners in public sector pension schemes were granted the same survivors' benefits as a widow (regardless of whether their opposite sex counterpart would have received a widow or widower's benefit). A case brought in the Employment Tribunal against the Secretary of State for Education earlier this year highlighted that these changes may lead to direct sexual orientation discrimination within the Teachers’ Pension Scheme, where male survivors of female scheme members remain entitled to a lower survivor benefit than a comparable same sex survivor. The Chief Secretary to the Treasury, Steve Barclay, has now issued a Ministerial Statement, saying that the government has concluded that changes are required and consultations will be carried out in relation to public sector pension schemes generally. Legislative changes are not proposed in relation to private sector pension schemes. Trustees must, however, continue to ensure that schemes do not provide discriminatory benefits. The issue of guaranteed minimum pensions, in particular, and the amount that should be payable in respect of surviving same sex spouses/civil partners continues to exercise the minds of trustees. Trustees may wish to revisit this issue in the not too distant future.
The global coronavirus pandemic has had a seismic impact on our economy and lifestyles. Whilst some of the challenges posed by COVID-19 are expected to be short-lived, the longer-term implications of the crisis remain unclear. In the second of our #PensionsTensions publications, we focus on the trustee experience, assessing the unique pressures faced by pension scheme trustees. Last week we considered the member experience.
Don't miss out on our Compensation and Benefits blogs. You can subscribe to receive them straight into your inbox. One of our most recent blogs looks at the PPF compensation cap and the ruling in Hughes v Board of the Pension Protection Fund.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.