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Pensions Insights - November 2021

02 December 2021

In our monthly update, Pensions Insights, we give you our take on the latest highlights in the world of pensions law and policy. 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.

Case Law

Replacement Principal Employer denied rectification defence - Mitchells & Butlers Pensions Limited v Mitchells & Butlers Plc [2021] EWHC 3017 (Ch), 2021 WL 05281032

This case primarily concerning a claim for rectification of pension increase provisions by the corporate Trustee of the Plan. In addition to detailed consideration of whether rectification should be granted, (on which matter the parties agreed there were mistakes in the drafting of various sets of rules) the case explored a defence put forward by Mitchells & Butlers Plc ("M&B") that the Plan documentation should not be rectified against it due to the manner in which it came to be Principal Employer of the Plan.

Whilst acknowledging that the mistakes would be rectifiable against the entity which was Principal Employer at the time the mistakes were made, M&B submitted that, when it became Principal Employer it did so as a bona fide purchaser for value without notice of and therefore free from the Trustee's equitable claim for rectification. The Trustee's position was that this defence was not available, because the doctrine of bona fide purchase was inapplicable to a transaction such as the one by which M&B assumed the position of Principal Employer in respect of the Plan.

The High Court in England held that the circumstances in which M&B became Principal Employer, being by deed of substitution rather than purchase of an interest in property, meant that the requirements for the bona fide purchaser defence were not met and in the circumstances rectification was granted.

New Law

New transfer diligence requirements from 30 November

Changes coming into force from 30 November 2021 will require trustees to carry out specific checks in relation to transfer requests to assess the risks to the member of transferring benefits.

The new process is based around two conditions, with the first condition consisting of a list of schemes (including public service pension schemes, authorised master trusts on TPR's published list and collective defined contribution schemes on TPR's published list) to which, once the trustees are satisfied beyond reasonable doubt that the receiving scheme is one of those listed, transfers may be processed without any further checks.

If the first condition is not met, further checks must be carried out by trustees to assess the level of risk to the member in proceeding with the transfer. This involves checking a number of aspects including the employment link to the receiving scheme (if this is an occupational pension scheme), residency checks (for transfers to QROPS) as well as checking for amber and red flags.

TPR has published guidance which includes details of the processes to be followed and due diligence steps required along with examples of red and amber flags. If any red flags are identified the trustees may refuse the transfer.  If yellow flags are present trustees are required to refer the member to Money Helper to book a guidance session. The member requires to attend a guidance session even if they already have independent financial advice and must provide evidence to trustees that they have attended the guidance session.

TRR update

The updated version of TPR's Code 12: Circumstances in relation to the material detriment test, the employer insolvency test and the employer resources test which includes updates to reflect changes made by the Pension Schemes Act 2021 came into force with effect on and from 25 November.

TPR are in the process of reviewing and updating policy documents impacted by the Pension Schemes Act 2021 including:

  • Compliance and enforcement policy for occupational pension schemes providing money purchase benefits.
  • Prosecution policy.
  • Compliance and enforcement policy for public service pension schemes.


Normal Minimum Pension Age Increase

Following Government consultation the Finance Bill 2022 is set to introduce provisions in relation to the increase of Normal Minimum Pension Age ("NMPA") from 55 to 57 on 6 April 2028 which include introduction of a protected pension age ("PPA") to allow some scheme members to retain a NMPA earlier than age 57.

As drafted these include provision that certain pension scheme members will be eligible for a PPA including members of HMRC-registered pension schemes whose scheme rules on 11 February 2021 conferred an unqualified right for them to take their pension benefits earlier than age 57.

Current drafting provides that a PPA will apply to all of a member's benefits (i.e. not just those accrued in advance of 6 April 2028) in the relevant arrangement, but a cut-off is included so that individuals had to have been a member of the pension scheme (where the scheme rules on 11 February 2021 already conferred an unqualified right to take pension benefits below age 57) before 4 November 2021 in order to have a PPA of 55.

Improving Outcomes in Non-Workplace Pensions

The FCA has commenced consultation on non-workplace pensions ("NWP") with a view to enhancing outcomes for consumers based on experience from workplace pensions.

Stating that they found evidence of some NWP consumers finding it difficult to identify appropriate investments, or leaving large amounts of their pension pot in cash, proposals include requiring firms offering NWP to:

  • offer non-advised consumers buying an NWP a ready-made, standardised investment solution (a ‘default option’), and to make this available alongside other investments; and
  • send a notification (‘cash warning’) to consumers with potentially inappropriate  levels of cash in their NWP to warn them that their pension savings are at risk of  being eroded by inflation.

The consultation is open until 18 February 2022.

Further Reading