Pensions: what’s new this week 22 November 2021
22 November 2021
Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.
This week we cover topics including: state pension uprating for 2022/23; a new court decision on pension sharing; and the latest HMRC newsletter.
- State pension uprating to be modified for 2022/23
- Family Court identifies ‘regulatory lacuna’ on PSO implementation
- High Court grants rectification, rejects ‘bona fide purchaser’ argument
- Latest HMRC newsletter
State pension uprating to be modified for 2022/23
State pension uprating for next year will be modified, following the passage into law of the Social Security (Up-rating of Benefits) Act 2021. This removes the earnings-related element of the uprating mechanism for the 2022/23 tax year, in response to a spike in earnings growth in connection with the Covid-19 pandemic.
Family Court identifies ‘regulatory lacuna’ on PSO implementation
A recent case involving the implementation of a pension sharing order (PSO) has highlighted a potential issue that scheme administrators should be aware of, where a PSO is being implemented at a time when a scheme has started to pay cash equivalent transfer values (CETVs) on a reduced basis due to scheme funding issues.
In these circumstances, a member must be given the option of an internal transfer, but the court noted a ‘lacuna in the regulatory obligations’ to a transferee, who might already have completed an optional section on the relevant form indicating that they wanted an external transfer before CETVs were reduced. The court suggested that the legal adviser for the spouse should not tick either the internal or external transfer box, to ensure that a scheme would not process a previously-completed form in these circumstances.
It is possible that the form will be amended to remove this section in future; the judge noted that this was a recommendation made in 2019 (in a report by the Pensions Advisory Group, of which he was a co-chair).
High Court grants rectification, rejects ‘bona fide purchaser’ argument
The High Court has granted rectification of pension increase rules in successive deeds, following a contested rectification application brought by the trustee: Mitchells & Butlers Pensions Limited v Mitchells & Butlers plc.
The judge granted rectification in relation to three deeds, and also considered points relating to the scheme’s amendment power and section 67 of the Pensions Act 1995.
A novel argument run by the employer company was that, as it had become the principal employer of the scheme after two of the deeds in question had been executed, it did so as a bona fide purchaser for value without notice of, and therefore free from, any equitable claim for rectification in respect of those deeds. The change of principal employer had occurred in the context of a corporate demerger – a new holding company had been created, which became the principal employer of the scheme. The High Court rejected this argument, holding that the ‘bona fide purchaser’ doctrine was not applicable in the circumstances. The purpose of the power to substitute a new principal employer of the scheme was to enable a change in the identity of the company holding that position – it was not concerned with a sale of property or transfer of rights, except to the extent that these were attached to that position. The new principal employer assumed the obligations that were attributable to that position from the date of the change, and the trustee could enforce rights against the new principal employer to the same extent as against the old principal employer.
Latest HMRC newsletter
HMRC has published its latest newsletter on the Managing Pension Schemes service (MPSS). It contains an update on the migration of schemes from Pension Schemes Online, including new guidance on how to prepare to migrate schemes to the MPSS. It also includes information about enrolling on the MPSS, scheme administrator IDs, and steps to take for schemes without a Pension Scheme Tax Reference.