1 November 2018
The GMP inequality issue moves centre stage
On 26 October the High Court ruled that the GMP inequality issue within three DB pension schemes sponsored by the Lloyds Banking Group must be addressed. This very important judgment will not only result in the Trustee of these schemes having to now uplift benefits for affected members in some way; it will likely also mean that all DB pension schemes contracted out at some point between 17 May 1990 and 5 April 1997 have to carry out a similar exercise. And ahead of such exercises there will be some immediate and medium term actions that employers and trustees will need to take.
This development is analysed in our News Alert issued on 29 October. See also our blog and checklist that provides a handy summary of tasks for trustees and employers to consider in both the short and medium term.
We are not surprised that the High Court has found that the GMP inequality issue needs to be addressed and are pleased that a wide range of methods can be used. However, we strongly suspect that GMP conversion will be the favoured route and to this end it is necessary for the DWP to bring its work in this area to an early conclusion.
Brexit “no deal” planning – DWP pension regulations laid in draft form
Ever since the European Union (Withdrawal) Act 2018 received Royal Assent in June, Whitehall has been busy pushing out regulations whose main purpose is to ensure that European references in UK law do not cause the latter to fall over on exit day (29 March 2019). Now it is the turn of the Department for Work and Pensions.
A draft of the Occupational and Personal Pension Schemes (Amendment etc.) (EU Exit) Regulations 2018 has been laid before Parliament to cover the eventuality that we crash out of the EU on exit day and so ahead of this it will be necessary to sweep through the canon of DWP pensions law, cutting out references to the European Union and the European Economic Area etc.
We understand that these regulations are only intended for this contingency. Should instead we leave with a deal, there should also be an implementation period (which currently is expected to run until the end of 2020) during which we effectively remain a non-voting EU member. It is only towards the end of this period (and maybe not at all) that something along the lines of these regulations will be needed.
These “contingent” regulations amend both primary and secondary legislation, affecting occupational pension schemes, the Pensions Regulator, Pension Protection Fund and the Financial Assistance Scheme. For the most part they appear to make simple referencing changes to reflect the intention of the Government that in a no deal scenario not only will we be leaving the EU, but our destination also lies outside the EEA.
One curiosity relates to cross-border schemes. The Occupational Pension Schemes (Cross-Border Activities) Regulations 2005, which only last week were amended to allow for IORP II (see Pensions Bulletin 2018/42), would be revoked if there is no deal, along with the primary legislation that underpins them. And in that scenario, the Pensions Regulator would need to provide guidance to those UK pension schemes which are currently authorised for cross-border activity within the EU. According to EIOPA, the UK and Ireland are the two countries between which there is significant cross-border pension provision.
It is good to see that the DWP is not lagging behind when it comes to “no deal” planning. Hopefully there will be a deal, but if there is not there will be the rather bizarre spectacle of the IORP II requirements for cross-border schemes lasting precisely 76 days – from 13 January 2019 to 29 March 2019!
The Pensions Regulator bares its teeth again
Two more examples of the Pensions Regulator showing its toughness have emerged in the last few days.
- On 26 October the Regulator reported that Derby Crown Court had handed down custodial sentences, along with substantial fines, to seven directors and senior employees of a national recruitment agency found guilty of offences under the Computer Misuse Act 1990 when four of them logged onto NEST’s online system, posing as their firm’s temporary workers for the purpose of opting these workers out of the pension scheme. NEST reported its concerns to the Regulator which launched prosecutions. These are the first custodial sentences resulting from Regulator prosecutions
- On 29 October we heard that the Regulator has banned from being pension scheme trustees, two directors of a company, which acted as trustee for the London Quantum pension scheme, which was at the centre of a pension scam case affecting more than 90 people and assets worth in excess of £6m. The Regulator replaced the trustee company in June 2015 (see Pensions Bulletin 2016/28)
From the information available there would appear to have been no doubt as to the outcome in either case. We would also not be surprised to hear in time that further action is being taken by the courts in regard to the second.
Civil Partnership Bill fails to attract Government support but progresses nevertheless
Tim Loughton’s private member’s bill that seeks to reform the civil partnership laws did not attract Government support when it was debated in Parliament on 26 October.
The Bill was introduced in February (see Pensions Bulletin 2018/07) and will likely result in additional potential costs relating to DB pension rights that may be accrued by opposite-sex couples who form a civil partnership, and who would not have otherwise formed a religious or civil marriage.
The Bill was opposed by Penny Mordaunt, Minister for Women and Equalities. She said, in a written statement, issued in the morning prior to the debate, that it was not possible to take forward the Government’s intended reforms in this area through Mr Loughton’s Bill (see Pensions Bulletin 2018/39). She went on to promise to consult to enable the Government to introduce legislation in the next Parliamentary Session to bring about the necessary changes.
However, the Bill completed its Commons stages on 26 October and has now been introduced to the House of Lords.
There is a clear desire in Parliament to make progress on this issue so Tim Loughton’s Bill continues in its role as stalking horse for Government action. It will be interesting to see what happens next.
“There are an awful lot of consultations coming shortly”
So said the pensions minister, Guy Opperman, in his keynote speech to the PLSA Annual Conference which was published by the DWP on 24 October.
In his speech, Mr Opperman said that:
- The response to the DWP’s consultation on the Pensions Regulator’s powers will be published “towards the end of this year” – this is as expected
- He and the Government are in favour of DB consolidation and superfunds and, once some details have been worked through he hopes to launch the consultation promised in the White Paper “very shortly” – we believe this means mid-November
- On collective defined contribution schemes (CDCs), the Government is “very close” to announcing the consultation; and
- “Contrary to popular belief [the Government is] making tremendous progress on the Pensions Dashboard”
So it will be a busy time ahead for the minister and his Department. Not only do they need to launch these consultations very soon now, but they need to be able to react and respond to the submissions received and have much of the legislation ready to go in next year’s Pensions Bill.
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.