Case Law
High Court approves compromise - Avon Cosmetics Ltd v Dalriada Trustees Ltd [2024] EWHC 317 (Ch)
Further to an earlier case concerning the validity of amendments to the Avon Cosmetics Pension Plan (see our Pensions Insights - February 2024 for background), the High Court has approved a compromise entered into between the parties to that case and has now reported its reasoning for doing so.
The judgement made clear that as a result of the orders made in the earlier case appointing representatives of both the "Final Salary Winners" and "Revaluation Winners" the court’s approval to a compromise was required. To grant such approval the court must be satisfied that it was for the benefit of all the represented persons and if satisfied the court may, but is not obliged to, give its approval.
The judgement explores the compromise and the rationale for entering into this including the prospect of an appeal of the original case being successful (and the costs of that).
Confirming his satisfaction that the compromise brings advantages to all involved and is for the benefit of all those represented the judge considered that it was wholly appropriate to exercise his discretion to approve the compromise and duly did so. The judge also commented that in his opinion s91 of the Pensions Act 1995 is no bar to the compromise of a dispute.
New Law
The Authorised Surplus Payments Charge (Variation of Rate) Order 2024
This Order, coming into force 6th April 2024, amends section 207(4) of the Finance Act 2004 to reduce the authorised surplus payments charge from 35% to 25%.
This reduces the charge to income tax which is imposed when an authorised surplus payment is made to a sponsoring employer by an occupational pension scheme that is a registered pension scheme.
Finance Act 2024
The Finance Act 2004 received Royal Assent on 22 February 2024. Schedule 9 of the Act makes amendments in consequence of or in connection with the abolition of the lifetime allowance charge including:
- repeals of the provisions that impose the lifetime allowance charge; and
- amends provisions that confer transitional protections in relation to the introduction of the lifetime allowance charge or reductions in the amount of the lifetime allowance
News
Spring Budget 2024 - Pension fund reforms to back British business
The Chancellor has announced pension fund reforms as a further step in the government’s plan to boost British business and increase returns for savers. This includes requirements for Defined Contribution (DC) pension funds to publicly disclosure their level of investment in the UK.
The reforms aim, by ensuring pension funds publicly disclose where they invest and the returns they offer, to make it possible for employers and savers to compare schemes and make informed choices. As reported in the last Central Legal Monitoring, the government is embarking on Value for Money (VFM) pension fund reforms to improve outcomes for savers and consolidate the DC pensions market. The reforms are intended to ensure that pension managers are focused on securing good returns for savers.
The proposed plans and reforms include that:
- By 2027 DC pension funds across the market will disclose their levels of investment in British businesses, as well as their costs and net investment returns.
- Pension funds will be required to publicly compare their performance data against competitor schemes, including at least two schemes managing at least £10 billion in assets.
- Schemes performing poorly for savers won’t be allowed to take on new business from employers, with The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) having a full range of intervention powers.
In addition the government has confirmed that it remains committed to exploring a lifetime provider model for DC pension schemes in the long-term and that it will undertake continued analysis and engagement to ensure that this would improve outcomes for pension savers, and build on the foundations of reforms already underway, including the Value for Money Framework.
Statement of strategy consultation published by TPR
The Pensions Schemes Act 2021 and the Funding and Investment Strategy (FIS) regulations introduce new requirements for trustees of DB schemes to set a long-term funding and investment strategy for their scheme.
From 22 September this year, trustees will also be required to complete a statement of strategy alongside their actuarial valuation, that sets out this long-term funding strategy and their approach to managing associated risks.
The new statement of strategy that trustees will be required to prepare is made up of two parts:
- Part 1, which records the funding and investment strategy
- Part 2, which records various supplementary matters (including how well the funding and investment strategy is being implemented, the main risks to the strategy and how they are being managed)
TPR is required to set the form of the statement of strategy and the detail of the information that trustees will need to submit, which may vary depending on the circumstances of the scheme and has created statement of strategy templates. A consultation seeking feedback on the proposed approach and templates is open until 16 April 2024.
If you have any queries about any of the issues covered, or you require advice on a pensions related matter, please do not hesitate to contact your usual contact.
