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Pensions Insights – July 2021

28 July 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 

Clarification on limitation periods – Punter Southall v Hazlett, in re Axminster Carpets [2021] EWHC 1652 (Ch)

The circumstances of the Axminster Carpets Group Retirement Benefits Plan (the Plan) in this case meant that a number of members were owed arrears of benefits made up of pension increases.  The High Court sought to determine whether claims by beneficiaries for such arrears would be time barred in terms of the Limitation Act 1980 and/or the Plan rules and whether such arrears could be forfeit in terms of the Plan's rules. 

Coming to the same conclusions as in Lloyds Banking Group Pension Trustees Ltd v Lloyds Bank plc [2019] Pens LR 5 the High Court found that any beneficiary claiming for arrears of pension would not be subject to any time bar in terms of the Limitation Act 1980.

In terms of forfeiture the High Court explored in detail how trustees should operate any discretion that they may have in terms of a scheme's forfeiture rule.  In this case the Plan included a rule that any benefits which remained unclaimed within 6 years of becoming due "shall be forfeited", but included a discretion for the Trustee to pay these to a beneficiary (notwithstanding the forfeiture) or to use for other purposes.
The High Court was asked to consider the factors that required to be taken into account by the Trustee in exercising its discretion in terms of the forfeiture rule.  Making clear that the approach taken to the exercise of discretion was for the Trustees and not for the Court the judgement provides some helpful guidance on what issues should be considered relevant factors including, in this case, that the underpayment of benefits was not the fault of the members and that the Plan was in an assessment period.

New Law  

Employer Resources Test for Contribution Notices confirmed

Responding to its recent consultation the Government notes that the aim of the new employer resources test is to assess the impact of an act or failure on a snapshot basis, removing the need to forecast how the employer might or might not have performed in the future absent the act or failure to act.

The response confirms that the option selected for measuring the resources of the employer is to use Profit Before Tax (PBT) on the basis this is a term widely understood by all involved; is less subjective than other options and would be indicative of the employer’s ability to support the scheme which is examined as part of assessing employer covenant.  

PBT will be valued in a three step process which compares the employers PBT excluding and including the effect of the act or failure as set out in The Pensions Regulator (Employer Resources Test) Regulations 2021 (which Regulations are due to come into force on 1 October 2021).


Guidance on GMP Conversion published

The GMP Equalisation Working Group (chaired by PASA) has published guidance on GMP conversion including examples of how GMP conversion is being used by early adopters, explaining the issues they faced, how they addressed them and how simplification can be achieved without, in many cases, a significant impact on members.

DWP's "Stronger Nudge" to pensions guidance

The DWP has opened a consultation seeking views and evidence on draft Regulations for delivering a Stronger Nudge to pensions guidance when individuals seek to access, or transfer for the purpose of accessing, their pension flexibilities applying to occupational pension schemes.    

The draft Occupational and Personal Pension Schemes (Disclosure of Information) (Amendment) Regulations 2021 propose to require the trustees and managers of schemes in scope to ensure individuals seeking to access, or transfer for the purpose of accessing, their pension flexibilities (generally, defined contribution benefits) have received or opted out of receiving appropriate pensions guidance.  The consultation period runs until 3 September 2021.

Counter Fraud Guidance for UK pension schemes, trustees and providers

Noting that fraud across the UK pensions sector has been estimated to cost over £6 billion a year, PASA has launched Counter Fraud Guidance which aims to inform upon the many types of fraud affecting the pensions sector and the range of tactics needed to be deployed to counter pensions fraud including proactive steps that can be taken to minimise its extent and cost.

The Counter Fraud Guidance is focused on encouraging organisations to ask a range of investigative questions focused on three main areas:

  • The legal and regulatory landscape: Does the organisation understand the different types of fraud? Is it aware of any emerging threats and ready to react? Has it sought the relevant legal, regulatory and cyber advice?
  • Understanding your organisation’s vulnerability to fraud: Does the organisation and its suppliers understand the vulnerabilities of systems and beneficiaries in respect of fraud, and the extent of risk and potential cost?
  • Ensuring your organisation is resilient to fraud: What potential for fraud exists, and how can the risk this poses be reduced to an acceptable level?

If you require any further information, please get in touch with one of the contacts below or your usual DWF contact.

Further Reading