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Pensions Matter at Pinsent Masons: January 2019

Monthly update from the Pinsent Masons Pensions team.

Select a topic to read more:

Regulator warns schemes to check whether master trust rules apply to them
PPF levy rules and 2019 deadlines
Investment consultancy and fiduciary management reforms published
New dispute resolution powers proposed for Pensions Ombudsman
Supreme Court: not discrimination to calculate ill-health pension using part-time salary
Court of Appeal: transitional protections amount to age discrimination
Charles Counsell appointed new TPR Chief Executive
Pensions cold calling ban finally in force
Local government scheme same-sex survivors' benefits rise to reflect Walker
Government supports replacing FRC with new regulator
And finally…


Regulator warns schemes to check whether master trust rules apply to them

The Pensions Regulator has issued new step-by-step guidance to help schemes check if they meet the legal definition of master trusts and therefore need to comply with new authorisation requirements.  Some older industry-wide schemes may now be treated as master trusts, and should now take legal advice.  The warning signs are where schemes have unconnected participating employers and provide genuine money purchase benefits, not just additional voluntary contributions.  A master trust may also be a group of DC schemes where each scheme in the group is under ‘common control’ with other schemes in the group.  Master trusts need to apply for authorisation or trigger their exit from the market by 31 March 2019.

PPF levy rules and 2019 deadlines

The PPF's levy rules will remain unchanged for 2019/20 and the total collected will fall by £50 million from the previous year's estimate, down to £500 million.  The PPF reports that the majority of respondents to its autumn levy consultation support its view that the core methodology is working well.  However, the PPF's latest Purple Book, which analyses scheme return data for virtually all PPF-eligible defined benefit schemes, shows that nearly two thirds of DB schemes remain in funding deficit, with an average recovery plan length of 7.8 years.  The aggregate funding level is the highest it has been since 2014, however, having increased to 95.7 per cent as a result of higher gilt yields driving down liability values, a rise in equity markets prior to March 2018 and the use of more up-to-date valuations, along with a continued reduction in the number of DB schemes.  Despite this, the PPF says it has confirmed the levy level because it is on track to meet its long term funding target. 

Schemes with Type A (parent or group company guarantees) and Type B (cash, UK real estate and securities) contingent assets that include a fixed cap should note that agreements will need to be re-executed on the new standard forms by the end of March 2019.  Scheme returns, guarantor strength reports and contingent asset certificates must be submitted to the PPF by midnight on 31 March 2019 on Exchange, and in hard copy form (where required) by 5pm on 1 April 2019.  Deficit Reduction Contributions Certificates and exempt transfer applications must be submitted by 5pm on 30 April 2019, and certification of full block transfers must be completed by 5pm on 28 June 2019.

Investment consultancy and fiduciary management reforms published

The Competition and Markets Authority (CMA) has published its final report in its investigation into the investment consultancy and fiduciary management (FM) markets.  The CMA will adopt a number of measures to increase trustee engagement and make it easier for them to evaluate the service they are receiving from their investment consultants and fiduciary managers.  Measures include mandatory tendering for FM services for more than 20 per cent of scheme assets (including existing FM mandates not previously tendered).  The CMA wants the Pensions Regulator to provide enhanced guidance on competitive tender processes.  Firms providing both consultancy and FM services will be required to separate their advice from their marketing materials.  There will be additional disclosure and standardised reporting requirements for FM firms.  Trustees will need to set their investment consultants strategic objectives, and new minimum standards will apply to the reporting of performance of recommended asset management products or funds.  The CMA says it will consult in early 2019 on an order implementing these measures, with the reforms taking effect "later in the year".

New dispute resolution powers proposed for Pensions Ombudsman

The government is consulting on new dispute resolution powers for the Pensions Ombudsman.  These include a power to resolve complaints early, without the need for a full determination, perhaps by issuing legally binding directions.   The Ombudsman may also be given a power to resolve disputes by way of mediation.  The consultation also seeks views on allowing employers to make a complaint or refer a dispute to the Ombudsman on their own behalf, for example in relation to maladministration of a group personal pension arrangement selected for their employees.  The consultation closes on 18 January 2019, and the government says it intends to make any legislative changes when parliamentary time allows.

Supreme Court: not discrimination to calculate ill-health pension using part-time salary

Williams v The Trustees of Swansea University Pension & Assurance Scheme (Supreme Court)

The Supreme Court has confirmed that it was not discrimination to calculate a defined benefit pension on the basis of part-time salary where an employee had been forced to reduce his working hours because of his disability.  Illness forced Mr Williams to move from full-time to part-time work for a few years before he applied for ill-health early retirement.  Although he was granted an enhanced ill-health early retirement pension (with an enhancement of over 28 years), his pension was calculated on the basis of his part-time salary.  Mr Williams claimed that he had been unfavourably treated as a consequence of his disability, which had required him to work part-time.  The Supreme Court judges unanimously disagreed.  The judge confirmed that the only basis on which Mr Williams was entitled to any award at that time was by reason of his disabilities.  Had he been able to work full-time, the consequence would have been, not an enhanced entitlement, but no immediate right to a pension at all.  The award of the pension was not in any sense “unfavourable”.

Court of Appeal: transitional protections amount to age discrimination

Lord Chancellor and Secretary of State for Justice and another v McCloud and Mostyn and others (Court of Appeal)

Sargeant v London Fire and Emergency Planning Authority and others (Court of Appeal)

The Court of Appeal has upheld claims of age discrimination by members of the Judicial Pension Scheme and the Firefighters' Pension Scheme.  When the schemes were altered to introduce less generous benefits, the members complained about transitional protection introduced to protect the rights of older members.  The Court of Appeal decided that the transitional protections amounted to unlawful direct age discrimination.  The discrimination was not justified because the protections did not constitute a proportionate means of achieving a legitimate aim.  In particular, the government needed to show how it had arrived at the conclusion that it needed to protect older members, and support its analysis by evidence; it was not sufficient simply to assert that it "felt right" to do so.  If the government does not apply for permission to appeal these rulings, the relevant authorities will need to decide how the schemes should respond.

Charles Counsell appointed new TPR Chief Executive

Charles Counsell, who currently heads up the Money Advice Service, has been appointed Chief Executive of the Pensions Regulator.  He will take up his post in April 2019, replacing Lesley Titcomb.  Mr Counsell previously worked at the Regulator on the roll-out of automatic enrolment.

Pensions cold calling ban finally in force

The ban on pensions cold calling took effect on 9 January 2019, after regulations were finally made in December.  Pensions cold calling is banned unless the caller is a trustee or manager of an occupational or personal pension, or is regulated by the FCA.  Also, the caller must have an existing relationship with the customer (such that the customer reasonably envisages receiving unsolicited calls) or, alternatively, the customer must have consented to these calls.  The Information Commissioner’s Office is responsible for overseeing compliance with the ban, and is expected to publish guidance to support the industry.

Local government scheme same-sex survivors' benefits rise to reflect Walker

Regulations take effect this month which will amend the Local Government Pension Scheme to take account of the court judgment in Walker v Innospec.  The changes mean that surviving same-sex spouses or civil partners will be entitled to more generous survivors' benefits (calculated as if they were widows rather than widowers).  The changes will take effect retrospectively from the dates civil partnerships and same-sex marriages were introduced (in 2005 and 2014 respectively).  Administering authorities will need to review all relevant survivors' benefits paid since those dates.

Government supports replacing FRC with new regulator

The government will replace the body responsible for regulating auditors, the Financial Reporting Council (FRC), with a new statutory regulator with stronger powers.  The change was one of the recommendations of the Kingham review of the FRC, which was commissioned in the wake of the collapse of Bhs and Carillion.  The Kingham review recommends that the new body be accountable to Parliament and funded by a statutory levy (rather than the current voluntary levy).  It also wants to see a more effective enforcement regime for entities whose audit arrangements are a matter of public interest (such as listed companies, credit institutions and insurance undertakings) under which directors and not just members of professional bodies will be accountable for their involvement in corporate reporting and their dealings with auditors.

And finally…

Jeanne Calment was recognised by Guinness World Records as the oldest person ever recorded, and when she died it was widely believed she was 122 years old.  She was well known in her native France – she claimed to have met Van Gogh in 1888 when he stayed in her home town of Arles.  Now, over 20 years after her death, an investigation by a Russian mathematician has cast doubt on her story.  Nikolay Zak has put forward evidence that the real Jeanne Calment died around 1934 and her daughter Yvonne assumed her mother's identity, possibly to avoid inheritance tax.  This would have made Yvonne just 99 when she died in 1997 – although it looks unlikely now that the truth will ever be known.   

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