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Pensions Insights July 2024

30 July 2024

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

Case Law

Virgin Media Limited v NTL Pension Trustees II

We reported on the High Court judgment in this case in our Pension Insights - June 2023

In that original decision the High Court held that:

  • s. 37 of the 1993 Act rendered void an amendment to the rules of a contracted-out scheme which related to s. 9(2B) rights, in so far as the amendment  was introduced without the actuarial confirmation required by Regulation 42(2)(b).
  • The words “section 9(2B) rights” as used in Regulation 42(2) included both past service rights and future service rights.
  • Voidness under s. 37 applied to all alterations to s.9(2B) rights and not merely to alterations that would or might adversely affect such rights.

That decision was appealed and the Court of Appeal has now dismissed that appeal noting that Bacon J came to the right conclusion in her "impressive judgment".

BBC v BBC Pension Trust Ltd [2024] EWCA Civ 767

We reported on the High Court judgment in this case in our Pensions Insights - August 2023.  That decision was appealed and the Court of Appeal has now upheld the decision of the High Court referring to this as an "admirably clear judgment".

In its decision the High Court held that the term "interests" (in the context of a restriction on the scheme's amendment power) could be construed to include a final salary link and that interest included the ability of members to accrue future service benefits under the Scheme on the same terms as provided for under the Scheme immediately before the amendment and the ability to accrue any future service benefits under the Scheme.

The judgment notes that one of the most valuable interests that an Active Member has is the ability to continue to accrue benefits on particular terms as their length of pensionable service increases, even if they have no enforceable legal right under the scheme to continue in employment.

New Law

Kings Speech – Pension Schemes Bill

The Kings Speech included an announcement that Bills will be brought forward to strengthen audit and corporate governance, alongside pension investment.

It is understood that the Pension Schemes Bill (not yet published at the time of writing) will seek to introduce measures including those:

  • preventing people from losing track of their pension pots through the consolidation of Defined Contribution individual deferred small pension pots.
  • ensuring all members are saving into pension schemes delivering value through the Value for Money framework and introducing a standardised test that trust based defined contribution schemes will need to meet to demonstrate they deliver value.
  • requiring pension schemes to offer retirement products so people have a pension and not just a savings pot when they stop work by placing duties on trustees of occupational pension schemes to offer a retirement income solution or range of solutions, including default investment options, to their members.
  • consolidating the Defined Benefit (DB) market through commercial Superfunds to offer greater protection for members in closed legacy DB schemes from the risk of losing part of their pension if their employer becomes insolvent.
  • reaffirming the Pensions Ombudsman (TPO) as a competent court, removing the need for pension schemes to apply to the courts to enforce TPO decisions in relation to the recovery of overpayments.
  • amending the Special Rules for End of Life (Pension Protection Fund and Financial Assistance Scheme (FAS)) extending the definition of 'terminal illness', allowing eligible members within the Pension Protection Fund and the Financial Assistance Scheme to receive a lump sum payment at an earlier stage.

News

TPR supervision of master trusts

The Pensions Regulator (TPR) has announced it is evolving its supervision of master trusts to focus on investments, data quality and standards, and innovation at retirement with an aim to see master trusts become the 'gold standard for pension provision'.  As part of this change TPR is expected to:

  • probe and challenge more on how a master trust’s approach to investments delivers for savers;
  • investigate how a master trust is seeking the best possible long-term risk-adjusted returns;
  • look more broadly at master trust investment governance practice and investment decision making; and
  • request deep dives into the systems and processes of master trusts.

Pensions Ombudsman to be reaffirmed as competent court

The Pensions Ombudsman has stated it is pleased that the planned Pensions Schemes Bill (see above) will include affirmation of TPO as a ‘competent court’ in overpayment recovery cases.

The Court of Appeal had ruled in November 2023 that TPO was not a ‘competent court’ for the purposes of concluding overpayment disputes where recoupment is sought (i.e. where the trustee looks to offset the overpayment against future instalments of pension).

The proposed changes now announced would allow schemes to recover money through recoupment in overpayment cases following an Ombudsman Determination without the need for a County Court order.

The Pension Ombudsman has reiterated that until the proposed changes come into effect that guidance contained within its factsheet should continue to be followed.

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.

Further Reading