Trade Union launches GMP inequalities compensation claim

In what could be a significant development, the Lloyds Trade Union is starting a sex discrimination claim relating to the impact of unequal GMPs accrued during the 1990s in certain defined benefit pension schemes applying across the Lloyds Banking Group.

In a newsletter published to its members, the LTU says that it has taken advice from a leading QC, as a result of which it is of the view that the GMP inequality issue needs to be addressed going forwards with compensation also being due for losses suffered to date.  Female members are likely to benefit the most, but certain males will also benefit due to the non-GMP element of their pensions having no guaranteed increases.

The LTU reports that its actuarial adviser has estimated that the adjustment for females could be worth up to £2,000, with the LTU saying that the total claim could be £300m excluding implementation costs.

The newsletter concludes with a request for union members to respond to a forthcoming letter “in order to protect their legal rights”.

Comment

It was perhaps inevitable that at some juncture, a class action would develop in this area.  The Department for Work and Pensions has still not fully responded to its 2012 consultation on the issue, but has held the line since January 2010 that schemes must ensure that equal pension benefits are paid to men and women.  This includes equalising for the effect of the GMP, although the DWP has acknowledged in recent years that schemes are waiting for GMP conversion guidance which it promises will be published when proposals have been developed that meet the Government’s objectives and address the concerns of stakeholders.

If this class action progresses it could well be a slow process, perhaps going as far as the ECJ if we are still in the EU by the time this point is reached.

Why not formally taking ill-health retirement when so entitled can damage your pension

”When is an ill-health retirement pension not an ill-health retirement pension” could be the start of a bad industry joke, but it is no laughing matter for certain ill-health retirees whose pension scheme falls into the PPF.

A member who has retired early due to ill-health should not see their pension drop if their scheme falls into the PPF.  However, the latest issue of the PPF’s Technical News notes that in some schemes, because the benefits are the same whether the member retires early due to ill-health or not, poorly members are simply retiring under the normal scheme early retirement rules.  If their scheme then falls into the PPF (and the member has still not reached their “Normal Pension Age”) the member can be subject to the compensation cap and have their pension reduced by 10%.

The PPF states that generally it cannot treat someone who retired under the standard early retirement terms as having ill-health early retired even if they would have met the ill-health conditions.

Comment

Although there may not be that many cases of this type, for those affected this seems a very unfair treatment.  The problem is exaggerated when you consider these are some of the most vulnerable people protected by a pension scheme.

It seems that the PPF’s hands are largely tied as the legislation dealing with PPF compensation makes quite clear that the compensation cap and 10% reduction apply where entitlement to the pension did not arise on ill-health grounds.  As a Pensions Bill is in prospect, perhaps it should be over to the DWP to make a quick fix?

Pressure grows for DWP to respond to its section 75 debt consultation

A Scottish National Party Early Day Motion is circulating in Parliament calling on the Department for Work and Pensions to publish its response to a consultation that closed over a year ago.

On 12 March 2015, the DWP issued a consultation document that examined ways in which the employer debt regime could be adjusted for non-associated multi-employer schemes (see Pensions Bulletin 2015/13).  Three easements were put forward:

• Trustees to be given greater flexibility to arrange a debt repayment plan with a departing employer
• Ceasing to employ active members to not be treated as a debt trigger where the employer remains financially active; and
• A change to the way the liability is calculated following an employment-cessation event

The consultation was long in the gestation, with a promise in March 2012 by Steve Webb, the then pensions minister, that the Government would “consider if there are any workable alternatives that would not reduce member protection”.

Since the consultation closed on 22 May 2015 there has been silence from the Government.

Comment

There is quite a backlog of responses to consultations building up at the DWP, along with consultations that have been promised but have not yet started.  Coming to a landing on this particular one is likely to be difficult with a clear risk that it will remain stuck in the “too hard” pile.

PPF refreshes its restructuring guidance

The Pension Protection Fund has made minor adjustments to the pension restructuring aspects of two of its documents published on its Restructuring & Insolvency webpage, but has not made any changes of note to the principles that guide it when involved in the pensions aspects of the restructuring or rescue of an insolvent business.

The “PPF approach to Employer Restructuring“sets out the PPF’s seven principles that it applies in such situations – typically when a regulatory apportionment arrangement is being considered.  These principles are reprised in section 2 of the ”General Guidance for Restructuring & Insolvency Professionals”.

Comment

Pension restructuring has been in the news of late and it is possible that over the coming period greater attention will be paid to this mechanism under which distressed employers can legally reduce the pension promises that they would otherwise be required to stand behind.  However, as it is a time-consuming and expensive mechanism to apply, pressure may grow for a more streamlined mechanism to be developed so that genuinely distressed employers of all sizes can more readily avail themselves of such an option.

Pitmans’ turn to be hit with a chair’s statement fine

Last month the Pensions Regulator named and shamed the trustees of a DC occupational pension scheme that had failed to provide the chair’s annual governance statement (see Pensions Bulletin 2016/27).  This month it has turned its attention to a professional trustee firm.

The Regulator has ordered Pitmans Trustees Limited to pay three £2,000 fines – the maximum possible – after it informed the Regulator that one of its schemes had failed to prepare a chair’s statement and, following discussion, two more such schemes came to the Regulator’s attention.

Further restrictions on salary sacrifice proposed

HM Revenue & Customs has launched a consultation in which it is proposed that certain benefits in kind will no longer attract national insurance contribution and income tax advantages when they are provided as part of a salary sacrifice and flexible benefit arrangement.

This follows on from the desire expressed in this year’s Budget (see Pensions Bulletin 2016/11) to limit the benefits that attract these advantages.  As expected, employer pension contributions remain unaffected by these proposed measures.

Tackling disguised remuneration

HM Revenue & Customs has also launched its promised technical consultation on changes to the disguised remuneration legislation that were signalled in this year’s Budget (see Pensions Bulletin 2016/11) but, as expected, the proposed measures do not impact employee benefit trusts.  The consultation is also silent on unfunded Employer-Financed Retirement Benefits Schemes, which at the Budget the Government stated it would keep under review.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.