Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes, which you might have missed, with links for further information.
In May, we noted that the European Commission had recommended to the EU Parliament and EU Council that the EU should not approve the UK's application to become a party to the Lugano Convention. Becoming a party to the Lugano Convention in its own right would mean that the UK would retain (broadly speaking) the same reciprocal recognition and enforcement of judgment arrangements with EU member states that were in place before the end of the Brexit transitional period. In a pensions context, the implications of this are particularly relevant where trustees have the benefit of a guarantee given by an EU parent company. The European Commission has now issued a note verbale to the Swiss Federal Council (which acts as the depositary of the Lugano Convention) saying that the "European Commission, representing the European Union, would like to notify to you that the European Union is not in a position to give its consent to invite the United Kingdom to accede to the Lugano Convention." The consequences of this will vary, depending on the type of jurisdiction clause contained in a cross-border agreement and the attitude of the courts of an EU member state to the recognition and enforcement of UK judgments. Trustees with a guarantee given by a company based in an EU member state, in particular, may want to take further advice on these issues.
The government has issued the outcome of its consultation in relation to the increase in normal minimum pension age to 57 from 2028. In its outcome, the government confirmed that those with an unqualified right to take their pension before age 57 will retain that right and individuals will be able to retain a protected pension age on certain pension transfers. At the same time, the government has published draft clauses of the Finance Bill 2021-22 for consultation. These include changes to the Finance Act 2004 to amend the normal minimum pension age and protected pension age provisions. Other clauses in the Finance Bill include an extension to the deadlines for scheme pays, where the annual allowance charge is £2,000 or more.
The Department for Work and Pensions (DWP) is consulting on draft regulations to establish the framework for Collective Money Purchase (CMP) schemes. The first phase is for single employer or connected employer CMP schemes. Further consideration will be given to non-connected employer schemes, master trusts and decumulation schemes in the future. The authorisation and supervision regime proposed for CMP schemes is similar to the master trust regime. Consultation closes on 31 August 2021.
The DWP aims to set out its “vision” for the regulation of defined benefit superfunds in autumn/winter 2021. Progress on superfunds has been slower than the industry originally anticipated (compounded, no doubt, by the pandemic).
The Pension Protection Fund (PPF) has issued a statement in response to the recent Court of Appeal ruling in The Secretary of State for Work and Pensions and the Board of the PPF v Hughes. The statement notes that the Court of Appeal supported the PPF’s approach to increasing payments to PPF and Financial Assistance Scheme members following the 2018 judgment of the European Court of Justice in Hampshire (which concluded that individual pension scheme members should receive at least 50% of the value of their accrued pension entitlement in the event of employer insolvency). The statement also notes that the Court of Appeal confirmed the High Court’s previous ruling that the PPF compensation cap is unlawful, as it amounts to discrimination on the grounds of age; however, “the period of time over which the cap has to be disapplied is not yet clear and, as such, the Secretary of State for Work and Pensions has been granted more time to address the Court on this complex legal issue.” The PPF confirms that, for the time being, it will continue to pay members their current level of benefits and will provide more information on the implementation of the judgment as soon as it is able to do so.
Those who missed our recent #PensionsTensions webinar, “Proportionality and The Pensions Regulator’s Draft Single Code of Practice”, may be interested in listening to the recording. We have also issued a quick guide that summarises key elements of the draft Code of Practice and suggested actions for trustees.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.