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 industry has received further clarification in relation to the issue of guaranteed minimum pension (GMP) equalisation and whether trustees will need to revisit past transfers out of a formerly contracted-out pension scheme. On 20 November 2020, the High Court handed down a judgment regarding this issue, in the latest instalment of legal proceedings relating to a number of pension schemes connected with the Lloyds Banking Group (the Lloyds schemes). The court concluded that in relation to individual transfers from the Lloyds schemes made under the cash equivalent transfer legislation, the trustee of the schemes remains liable for a failure to pay the correct (i.e. equalised) cash equivalent transfer value amount. Individuals who have previously taken an unequalised cash equivalent transfer value from the Lloyds schemes can, therefore, bring a claim for any top-up payment due. Such claims are not time barred under the rules of the Lloyds schemes or by statute. Alternatively, the trustee could pay the top up amount without a court order. The judge indicated that trustees should take proactive steps to correct past statutory transfers, but fell short of prescribing precisely what action is required (this will presumably depend on individual scheme’s circumstances, such as the available data). The position is different where the transfer from the Lloyds schemes was as a result of a bulk transfer, or was a non-statutory individual transfer under the relevant Lloyds scheme rules. In the case of the latter type of transfer, the court ruled that an aggrieved individual could apply to court, challenging the trustee’s actions on the basis that it had committed a breach of duty when exercising the power and paying the (unequalised) transfer. Those seeking clarification on trustees’ GMP equalisation obligations in respect of past bulk transfers should note that the court ruling only addressed mirror image bulk transfers from the Lloyds schemes on a without consent basis (finding that, on the assumption that these transfers had been carried out in compliance with legislative requirements and the relevant scheme rules, the transferring members were no longer entitled to benefits from the Lloyds schemes). The court did not directly rule on the position regarding other types of bulk transfer (for example, bulk transfers based on actuarial equivalence). Trustee boards that have not yet started the GMP equalisation process should get their projects underway and this court ruling will provide some assistance in doing so. Trustees might find that they need to take a pragmatic (but proportionate) approach where they lack accurate data regarding historical transfers dating back to 17 May 1990. Legal and actuarial advice will be required.
The Pensions Regulator’s (TPR) quarterly compliance and enforcement bulletin highlights a large increase in the number of unpaid contribution and compliance notices issued. TPR also comments on two confiscation orders secured under the Proceeds of Crime Act 2002, which require individuals convicted of defrauding pension schemes to repay the money or face extra time in prison. This is part of TPR’s commitment to ensuring that pension criminals do not benefit from their crimes.
Have you seen our 30 seconds #PensionsTensions videos? Associate Susan Oakley highlighted how recent changes to insolvency law provide new options for employers. Partner Matthew Giles looks ahead to today’s expected announcement on the outcome of the consultation to align RPI with CPIH.
Finally, watch out for the outcome of consultation on aligning RPI with CPIH, which is expected to be published today.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.