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Pensions: What's new this week - 23 November 2020

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24 November 2020

Each week the Allen & Overy Pensions team, rounds up the latest legal and regulatory developments in the world of occupational pensions. Contact us if you would like to receive our podcast summary, or our full briefing by email, at the start of each week.

Read the latest edition of 'What's new this week' below to find out more information on the stories that matter to you. 

Lloyds 2: GMP equalisation and past transfers

The High Court has handed down its ruling in the second Lloyds case on GMP equalisation. The first decision, published just over two years ago, established that trustees of defined benefit occupational pension schemes have a duty to equalise benefits for male and female members in relation to the unequal effect of guaranteed minimum pensions. It also provided guidance on methods by which this might be achieved.

However, some questions were left unanswered by that ruling – for example, how to deal with past transfers-out (where the transfer payment was less than it ought to have been if the trustees had taken into account the obligation to equalise benefits) and what this means in terms of trustee discharges in relation to those transfers.

The key headline from the latest ruling is that, at least in relation to statutory transfers, where a transfer value was underpaid due to a failure to take equalisation into account, trustees did not properly perform their statutory duty, and are not discharged under legislation from the obligation to pay a correctly calculated cash equivalent. No statutory time-bar applies to limit a member’s right to require trustees to make a top-up payment. Mr Justice Morgan’s ruling provides some straightforward and consistent principles and states that trustees should be proactive in deciding how to apply these to past transfers from their scheme. To read more about the decision, click here for our briefing.

Executive pensions: new pay guidelines

The Investment Association (IA) has published its new executive pay guidelines, together with a letter sent to the Chairs of Remuneration Committees of FTSE 350 companies (press release here).

The IA continues to target pension contributions for executives – the letter sets out the circumstances in which the IA’s Institutional Voting Information Service (IVIS) will flag companies with the highest level of warning (red top), in relation to arrangements for new and existing directors. In particular, the letter notes that, for companies with year-ends starting on or after 31 December 2020, if a remuneration committee has not disclosed a credible action plan to align an existing director’s pension contribution to the majority of the workforce rate by the end of 2022, IVIS will red top the remuneration report if the pension contribution received by the executive director is 15% or more of salary (last year this threshold was set at 25% or more of salary).

IVIS is designed to assist shareholders with voting during AGM season; the red top warning is used to indicate the strongest level of concern.

TPR: latest compliance and enforcement bulletin

The Pensions Regulator’s (TPR) latest compliance and enforcement bulletin indicates an increase in the use of some of TPR’s enforcement powers since the previous quarter (including TPR’s information-gathering powers, mandatory penalties for the Chair’s statement, and production orders from the High Court). TPR has also published an accompanying press release reminding employers of their auto-enrolment duties, highlighting an increase in compliance notices and unpaid contributions notices from the previous quarter.

ICO fines Ticketmaster £1.25 million

The Information Commissioner’s Office has fined Ticketmaster UK Ltd £1.25 million for failing to keep personal data secure. Customers’ financial details had been obtained via a chat-bot, hosted by a third party, on Ticketmaster’s online payment page. The ICO concluded that Ticketmaster had failed to: assess the risks of using a chat-bot on its payment page; identify and implement appropriate security measures to negate the risks; and identify the source of suggested fraudulent activity in a timely manner.

Although the data breach began in February 2018, the penalty only relates to a period of approximately one month (from the date the General Data Protection Regulation came into effect in May 2018).

You can read more about what recent fines by the ICO indicate about its approach to penalties in this new blog post by our data protection experts.

Pension Schemes Bill update

The Pension Schemes Bill has been passed by the House of Commons and has now returned to the House of Lords for consideration of amendments made in the Commons. This is the last stage before Royal Assent; the government had been planning for the Bill to receive Royal Assent this year.

PPF levy consultation: clarification

The Pension Protection Fund (PPF) has clarified, in response to feedback, an element of its current consultation on next year’s levy rules. The PPF has confirmed that the recalibration of the mapping of credit ratings to monthly scores will not impact 2021/22 levies (but will feed into monthly scores from April 2021).