Welcome to the Summer 2015 edition of Osborne Clarke’s quarterly trustee update. This summarises the latest pensions developments of interest to trustees and all those involved with the pensions industry.
Following the latest developments will help trustees keep their knowledge and understanding levels up-to-date, in line with the Regulator’s requirements. For everyone else, we hope you find this round-up useful and informative. If you would like to discuss any of the content, or have a subject that you would like us to cover in next quarter’s edition, please let one of us know. Our contact details are set out below.
Jonathan Hazlett and Caroline Blackwood
Are your members’ pensions safe? Pension scams – the latest
Pension scams and pensions liberation are a major issue of concern within the pensions industry. Regulators and other bodies as diverse as TPR, the FCA, the Serious Fraud Office and the National Crime Agency are involved in combatting these scams. It is essential that trustees remain aware of the issues presented, and what needs to be in place in their schemes to deal properly with the threats posed. Find out more about recent Pensions Ombudsman decisions on this, and a new industry Code of Good Practice on combatting pension scams.
Capping pay for pension purposes – is this a breach of an employer’s duty of good faith?
The High Court has given a further decision in the long running claim by Mr Bradbury about the BBC’s actions when it imposed a cap on increases to pensionable salary in its DB pension scheme in 2010. This decision considers whether the BBC breached its duty of good faith to affected employees by its actions. This is a highly topical area of pensions law given the continuing pressure on companies to reduce liabilities in their DB schemes. Read on to find out what the High Court decided.
Abolition of DB contracting-out – your questions answered
From April 2016 state pension reforms will come into force, with the removal of the state second pension (S2P) and introduction of the single-tier state pension. A consequence of this is that contracting-out from S2P on a defined benefit (DB) basis will be abolished from 5 April 2016. This has a number of implications for affected schemes, which trustees and employers need to be addressing now. Read our update in which we look at what schemes are affected, what issues this raises, and the steps that need to be taken.
Can you put a price on trust? And how far does trustee protection go…
According to the Pensions Ombudsman you can – and for two unfortunate trustees that price is £193,010 plus interest. This instructional decision shows the consequences of two pension trustees breaking a lot of rules in the way they behaved. It also demonstrates the limits of the strong protections afforded to most pension trustees in the form of exoneration and indemnity clauses in the trust deed and rules – these will not protect trustees who act deliberately in disregard of the interests of scheme beneficiaries.
Dealing with the debt on an employer exit from a non-associated multi-employer scheme – DWP call for evidence generates conflicting responses
A section 75 debt arises on an exiting employer from a multi-employer DB pension scheme, requiring it to pay up-front its share of the scheme deficit. Often referred to as the ‘s 75 regime’, this can create acute difficulties for employers who do not have the resources to pay the debt. This has caused problems for charities that participate in multi-employer DB schemes, and can threaten the on-going survival of the organisation. Given the difficulties, the government has been lobbied to change the s 75 regime. It issued a call for evidence, in which it made various suggestions on possible changes, and asked for input from the industry. A number of leading organisations have responded, and their conflicting recommendations show how difficult it will be for the government to find an acceptable route through.
Scheme funding – are you up to date with the latest from TPR on this?
The Pensions Regulator (TPR) has issued its annual defined benefit funding statement for 2015. This is particularly relevant to trustees and employers of schemes undertaking valuations with effective dates between 22 September 2014 and 21 September 2015. All trustees need to be aware of the latest guidance from TPR on how to approach scheme funding issues, which are a constant live issue for DB schemes.
Why is early negotiation on pensions issues for an outsourcing contract essential?
When a public body outsources work to the private or third sector, the pensions responsibilities taken on by that body are usually onerous. The transferring employees are often given pension protection by way of the contractor being ‘admitted’ to the relevant public sector pension scheme. In a Local Government Pension Scheme (LGPS) context, this route can present significant and uncontrollable pension costs and risks arising for the contractor. In this post our public sector pensions specialists highlight to contractors and public sector bodies alike that these issues should be dealt with at an early stage of the tender process, so that proper negotiation about controlling the associated costs and risks can take place.
Regulatory round-up – we give you the highlights from TPR and the PPF this quarter
We report on a couple of auto-enrolment developments, the outcome of the long running Desmond case, TPR’s new approach to public sector governance, some new questions on DC scheme returns for 2015, the need for trustees to prioritise record-keeping, suspension of trustees, and PPF guidance for challenging a scheme’s Experian insolvency score.
Queen’s Speech and a new government – pensions implications
A new government was elected on 27 May 2015. In the Queen’s speech the government said it will maintain the basic state pension “triple lock” for the next five years, which means that basic state pension will be increased each year by the highest of the growth in average earnings, prices inflation or 2.5%. It also announced a ban on income tax, VAT and National Insurance Contribution increases for five years, as well as an extra budget on 8 July 2015. We may hear more in that budget about the conservatives’ manifesto plan to cut tax relief on pension contributions for those earning over £150,000.
Ros Altmann has been appointed as the new Pensions Minister, succeeding Steve Webb.
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