Pensions Bulletin

Our viewpoint

New Government being formed following Boris Johnson winning Conservative leadership contest

The Conservative Party elected its new leader on Tuesday morning and on Wednesday afternoon Boris Johnson became Prime Minister.  This has started a train of events with many ministerial appointments being made, starting with the cabinet.  See here for the latest official list of Government ministers, which will no doubt lag behind events.

Parliament rises on 25 July for the summer recess, returning on 3 September.


We are witnessing not only a new Prime Minister returning from the Palace, but also the formation of a new and much more Brexit-inclined Government.  Both provide an opportunity for significant policy shifts, not all necessarily connected to the issue of the day.

However, it does seem that up until Halloween, the new Government will be focussed entirely on delivering Brexit, with all domestic legislation being put on hold.  So, the already delayed Pensions Bill looks as if it is not going to make an appearance until November at the very earliest.  And we may have to wait quite some time before Boris Johnson expands on what he meant by ‘fixing the Lifetime allowance’, promised by him in his leadership campaign.

“Protected pension ages” – tax trap that affected members need to be warned about

Pensions tax law provides that those who have a “protected pension age” of less than 55 are subject to tax penalties if they take pension benefits between their protected pension age and 55 and are then re-employed by the same employer within six months or within one month if re-employed in materially the same role.

There have been a number of Pensions Ombudsman cases in recent years involving policemen who fell foul of this trap (see for example Pensions Bulletin 2016/02 where the Ombudsman decided that employers were liable for the members’ losses).

In the latest development in this area the High Court has upheld appeals from former police officers whose complaints to the Ombudsman had been dismissed.  The High Court ruled that where the scheme administrator knew that the Police Pension Scheme members would be re-employed and had told members that their lump sum would be tax free, this was a negligent misstatement.  As a result, the scheme administrator was liable to the police officers for the loss they suffered.

The Court left open the question of whether or not scheme administrators have a duty of care to inform members of the tax trap by including “some precautionary words about re-employment” in member communications even if they have no special knowledge about re-employment possibly taking place.


This case serves as a reminder of this issue.  We can see the importance of including a warning in communications to members with protected pension ages about the tax bill that re-employment with the same employer could generate if they choose to take their benefits before they turn 55.  Failure to do so may result in the employer, trustees or benefit administrators having to pay the tax bill.

Surviving partner is eligible for survivor pension despite being married to someone else

In a judgment that may have a bearing on the operation of some occupational pension schemes’ survivor pension rules, particularly those in the public sector, the Court of Appeal has ruled that a scheme cannot disallow payment of a survivor pension to the long-standing and dependent partner of the deceased who would otherwise have qualified for the pension were it not for the fact that she remained married to her long-since estranged husband.

The case concerned the Armed Forces Compensation Scheme which allows partners of officers to receive a survivor pension in certain circumstances, but not whilst that partner remains legally married to someone else.  The Armed Forces Pension Scheme has similar wording and is subject to parallel proceedings. The Court of Appeal ruled that, as with the 2017 Brewster case (see our News Alert), this restriction breached the partner’s human rights, suggesting that restrictions should not be “based on a partner’s marital status, but by requiring the demonstration of a substantial, exclusive and financially dependent relationship in practice”.

This judgment is likely to mean that similar rules in other public sector schemes will need to be revisited, although the Court did not exclude the possibility that an exclusionary rule of this character could be justified and proportionate were the defendant to provide witness material at a proper stage in the proceedings.


We suspect that the Government will now find it difficult to take the matter any further, assuming it wishes to do so.  What the draftsman at the time might have thought to have been a reasonable restriction has clearly been found wanting when applied in practice.  Given this, the ruling may result in a number of occupational schemes – not just those in the public sector – casting their eyes over their survivor pension rules to see if they remain fit for purpose.

Government consults on NHS Pension Scheme changes

The consultation announced at the beginning of June (see Pensions Bulletin 2019/22) has at long last emerged, covering how to modify the NHS Pension Scheme so as to stop the flow of consultants, GPs and other senior clinicians choosing to reduce workloads, turn down extra responsibilities and/or retire early, all because of the complex impacts of pensions tax.

As expected it is concerned primarily with introducing a 50:50 option which lets affected individuals halve their pension contributions in exchange for halving pension accrual (whilst retaining full levels of ill health and death benefits); and later in a tax year, the individual can choose to use the saved contributions to buy pension. It is suggested that this gives individuals a better chance of managing their ‘pensions growth’ and consequential pensions tax liabilities (primarily the annual allowance charge, particularly following the April 2016 introduction of the taper, but also the lifetime allowance charge).  However, the Government welcomes view on whether the 50:50 option goes far enough, and it sets out some alternative options put forward by stakeholders (including phasing pensionable salary rises over years and cash in lieu of pension funded from saved employer contributions) that might reduce the build-up of pensions tax charges

The consultation also proposes to make the NHS scheme’s ‘Scheme Pays’ option more transparent (members taking up Scheme Pays defer substantial annual allowance tax bills so that they are instead paid by the NHS scheme and recouped from the member’s retirement income).  The proposal is that the NHS scheme would express its recouping of tax by way of a current pension debit rather than, effectively, as a cash loan so that those who breach the annual allowance can better judge whether, net of the tax charge, there is benefit in staying in the pension scheme.

Finally, it seeks views on how employers, the NHS scheme and trades unions can work together to support those impacted understand and manage their tax, pay and pensions – both in year and over a career – in order to minimise the administrative burden of personal finance management on hard working clinicians.

Consultation closes on 14 October and the Government intends to make changes in time for the new financial year.


The consultation notes the generosity of the NHS scheme – so that accrual for high earners is at the level where Government (Treasury) policy has indeed intended the lifetime and annual allowance to impact.  But the NHS is facing a crisis with plenty of evidence of senior clinicians who can tackle waiting lists through additional shifts being reluctant to do so because of the unpredictable pensions tax bills they may face. 

The consultation authored by the Department of Health and Social Care is hoping that it can find a solution within the current pensions tax framework, with it containing no hints as to any wider pensions tax reforms that the Government may or may not have in mind.  But what is being proposed seems to be only a partial solution. 

The infamous tapered annual allowance means that there are ranges of income where undertaking additional paid work, even if not generating any increase in pension, potentially triggering pensions tax (as the individual moves down the annual allowance taper).

And flexibility tools can only be effective if a member has information in time.  The paper acknowledges that part of the problem is the complicated range of employment models for individuals in the NHS scheme; and the difficulties for scheme administrators collecting information and putting together the numbers they are obliged to provide in order for the members to assess anything.  Perhaps even more challenging, it will be some time before Government even decides the benefit scales for many public sector workers, given the recent announcements following the McCloud ruling (see Pensions Bulletin 2019/28).

Maybe, with a new Prime Minister in place, what is being proposed might not be the end of the issue.

Finance Bill published

On 11 July the Government published draft legislation for the next Finance Bill, due to be finalised after the Budget, which if the normal political cycle continues, should fall in the late Autumn.

Although there were no specific pensions tax measures, one proposal moves HMRC up a notch in the pecking order on employer insolvency for those taxes collected and held by businesses on behalf of other taxpayers, such as VAT, income tax and employee NICs.  Currently HMRC is an unsecured creditor, just like a DB pension scheme in respect of deficits, most notably when assessed under Section 75 of the Pensions Act 1995.

The new measure is intended to have effect from 6 April 2020.


This change, announced in Budget 2018, will have a small detrimental effect on the ability of DB schemes to extract money from a failed business. 

Pensions Ombudsman’s annual report points to success in resolving disputes informally

This year’s annual report from the Pensions Ombudsman highlights the continuing transformation that has taken place within the Ombudsman’s office, set against an increase in demand, thankfully with many enquiries being capable of early resolution through the team formerly at TPAS incorporating 240 volunteer pension specialists.

Of those complaints resolved during the year, 80% were done so informally by adjudicators, 8% followed the acceptance by the parties of an Adjudicator’s Opinion, 9% required an Ombudsman’s Determination following an Adjudicator’s Opinion, 2% needed an Ombudsman’s Determination following an Ombudsman’s Preliminary Decision, whilst the Ombudsman decided that the investigation should not continue in the remaining 1% of cases.  Of the 12% of cases requiring intervention by the Ombudsman 72% were not upheld.

Complaints about failure to act on instructions, transfers (such as the calculation or payment of transfer values) and the incorrect calculation of benefits continued to be the most common topics of completed investigations.

There were also thousands of enquiries dealt with through a dedicated First Contact Team – more than 8,200 by phone and more than 7,200 in writing.

The recent DWP consultation on amending the Ombudsman’s powers is mentioned (see Pensions Bulletin 2019/01), which includes closing cases without the need for a Determination, and to mediate and resolve a complaint before going through an internal dispute resolution process.  The Ombudsman says that he looks forward to engaging with the DWP to progress legislative changes, but there is no news on when these changes will be delivered. 


With the transfer of the TPAS team in March 2018 the way in which enquiries are handled is very different to the more formal approach that the Ombudsman’s predecessors used to operate, with all the delays that this generated.  This is good news for those who need to call on a third party to assist them with a pension dispute.

Pensions Regulator reports on a year of being clearer, quicker and tougher

This year’s report from the Pensions Regulator highlights the actions taken as part of its new regulatory stance, summed up by the phrase ‘clearer, quicker, tougher’.  The Regulator’s use of frontline powers jumped by 32%, cases increased by 24%, trustee appointment powers were used 11% more than last year and there was a 37% increase in fines issued for automatic enrolment non-compliance.

In addition, nearly 15% of occupational pension schemes were subject to a ‘risk-targeted regulatory intervention’ and nearly 300 trustees were subject to a mandatory penalty notice due to either no DC Chair’s statement being issued or not complying with the Regulator’s requirements.

The Regulator met 18 of its 22 key performance indicators and says that the ambitions set out in its 2018-2021 Corporate Plan have largely been achieved or are well underway.

Long-term expenditure trends show a significant step up, with next year’s Budget rising to £98.4m (up from an actual spend of £85.4m in 2018/19) and 2020/21’s to £110.2m.  This reflects the additional funding agreed with DWP to enable the Regulator to implement its new approach to regulation, along with other matters.


There are few clues to where the Regulator is going next in this year’s report beyond more of the same under its new operating mantra.  There is also almost complete silence about the new powers that the Regulator needs in order to complete its journey towards being quicker and tougher.

HM Treasury embarks on financial services regulatory framework review

HM Treasury is kicking off the first phase of its Regulatory Framework Review for the financial services industry with a Call for Evidence on how existing cooperation between the government and regulatory authorities can be enhanced, to ensure the best outcomes for the financial services sector, consumers of financial services, and the UK as a whole.

The Call for Evidence invites submissions and suggestions for how the government and regulators can work together more efficiently, for example to improve authorisation, supervision and enforcement by using new technology or sharing data. The regulatory authorities involved include the Financial Conduct Authority, Prudential Regulatory Authority, Bank of England and the Competition and Markets Authority, and responses are requested by 18 October 2019.

Later phases in the Review will covering broader framework issues once the arrangements surrounding Brexit become clear.


New technology tends to lead to increased efficiencies, so it is good news that HM Treasury is reviewing this area.  But one suspects that the really interesting parts of the Review will take place once the Brexit arrangements are known.

The Regulator makes auto-re-enrolment simpler

The Pensions Regulator has launched a simple on-line tool designed to assist employers in fulfilling their statutory duties when their re-enrolment date falls due, particularly in completing and submitting their re-declaration of compliance.

The tool allows the user to remain anonymous and works by asking a series of questions and then supplying context-sensitive answers.  It has been launched to coincide with thousands of small and micro employers reaching their re-enrolment dates in the coming months.  The Regulator notes that the majority of employers will not have staff to re-enrol.  However, it is a legal requirement to carry out the check, re-enrol where necessary and make a declaration, and failure to do so may result in a fine.

In a separate, but also auto-enrolment themed statement the Regulator has confirmed it is working with the Insolvency Service to track down employers who have tried to avoid their auto-enrolment duties by closing their original businesses and transferring employees to a new business. 


The highly successful auto-enrolment policy can only continue to work if employers take their re-enrolment responsibilities seriously, although thankfully there has been a low level of opt outs so far.  This tool should assist sweep up those who have dropped out and now need to be put back in.

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.

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