Case Law
Surplus subject to resulting Trust - in the Petition of abrdn (Slsps) Pension Trustee Company Limited v for Directions
In this case the Trustee of the Scheme petitioned the Court for directions in relation to the DB section of the Scheme in respect of which a de-risking exercise was proposed which involved benefits being secured by a buy-in policy and in due course a buy-out policy. That section of the Scheme was in surplus, however the Scheme Rules did not expressly permit payment of surplus to an employer, nor amendment of the Rules to facilitate that.
The Trustee sought direction on various matters including three specific questions:
- whether it was entitled to enter into the proposed de-risking arrangement;
- whether any assets remaining after completion of the exercise were subject of a resulting trust; and
- if a resulting trust did arise which entities would be entitled to benefit from this and when. Particularly, should this operate only in favour of employers participating immediately before the date when no members remained in pensionable service.
The Court found that in relation to question 1 the Trustee was entitled to proceed with the de-risking arrangement. Entry into the buy-in stage of the arrangement fell within the scope of the duty contained in the trust deed to hold and administer the fund. Entry into the buy-out stage was permitted by Rules of the Scheme which when read together allowed, on a winding up of the scheme, the securing of benefits by the purchase of individual policies or annuity bonds.
In relation to questions 2 and 3 having found that a resulting trust of surplus assets would emerge (subject to all benefits being secured and winding up expenses etc being paid) the Court was satisfied that no formerly participating employer whose participation had terminated retained any entitlement to share in the surplus.
New Law
Pensions (Extension of Automatic Enrolment) Act 2023
The Pensions (Extension of Automatic Enrolment) Act 2023 received Royal Assent on 18 September 2023. This Act makes provision to extend pensions automatic enrolment to jobholders under the age of 22 and to lower the qualifying earnings threshold for automatic enrolment.
The Pensions Act 2004 (Amendment) (Pension Protection Fund Compensation) Regulations 2023 (draft)
The Court of Justice of the European Union Judgment of 6 September 2018 in the Hampshire case ruled that, broadly speaking in the event of employer insolvency, every former employee should receive no less than 50% of the value of their accrued old age benefits (the minimum level) and that protection should never fall below this minimum level.
These draft regulations as published will retain the effects of this Judgment in domestic legislation beyond 31 December 2023 by amending existing legislation to ensure that Pension Protection Fund members receive compensation of at least 50% of the value of their accrued pension benefits and to remove certain references to the Pension Protection Fund compensation cap from existing legislation.
The Pensions Act 2004 and the Equality Act 2010 (Amendment) (Equal Treatment by occupational pension schemes) Regulations 2023 (draft)
This draft Statutory Instrument as published restates retained EU law on two areas of equal treatment in occupational pension schemes.
It restates the right to equal pay between men and women where sex discrimination has arisen in an occupational pension scheme because of legislation on Guaranteed Minimum Pensions.
It also restates retained EU law on non-discrimination on grounds of sexual orientation (as expressed in the Framework Directive) in relation to benefits payable to the surviving spouses and civil partners of members of occupational pension schemes.
In doing so, it restates the law as explained in the cases of Allonby v Accrington and Rossendale College and others [2004] ICR 1328, and Walker v Innospec Ltd and others. [2017] UKSC 47, which have until now not been reflected in legislation.
It is being made because under the Retained EU Law (Revocation and Reform) Act 2023 after 31 December 2023 retained EU law rights that had a direct effect in the UK will cease to apply.
News
PASA releases Data Guidance on DB benefit accuracy
PASA has published new Data Guidance on benefit accuracy for DB schemes noting that “Trustees have a duty to ensure members receive the pension benefits they are due. PASA has previously issued Guidance focused on data quality and we are building on this here by focusing on benefit accuracy."
The aim of the Guidance is to support schemes in understanding key areas which will support benefit accuracy and focuses on:
- Benefit Specification
- Data Specification
- Benefit Audit
- Automation (Scalable based on scheme membership)
- Independent assurance
PPF proposes £100m levy for 2024/25
The Pension Protection Fund (PPF) has announced in its 2024/25 levy consultation that it expects to collect £100m in levy next year, further reducing the levy by half compared with the 2023/24 estimate.
Consistent with its funding strategy outcomes published in Autumn 2022, the PPF is continuing the process of transitioning to a lower levy with the expectation being that 99% of levy payers will see their levy fall compared to the current year.
