Pensions: what's new this week - 25 April 2022
25 April 2022
Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.
This week we cover topics including: Guidance on GMP equalisation interest payments; Tribunal: Pension scheme trustee was not treated detrimentally by employer; Tribunal: AE deadlines don’t apply until correct information given; PRA statement on capital arbitrage transactions; HMRC managing pension schemes newsletter; PASA guidance on administrator pre-employment fraud checks.
- Guidance on GMP equalisation interest payments
- Tribunal: Pension scheme trustee was not treated detrimentally by employer
- Tribunal: AE deadlines don’t apply until correct information given
- PRA statement on capital arbitrage transactions
- HMRC managing pension schemes newsletter
- PASA guidance on administrator pre-employment fraud checks
The Pensions and Lifetime Savings Association (PLSA) has published HMRC-approved guidance on the tax treatment of interest payments on pension arrears paid as a result of GMP equalisation (GMPE), and whether tax on these payments needs to be deducted at source. HMRC has confirmed that, for the purposes of GMPE:
- (for pensions tax purposes) interest payments should be treated as interest payments made in respect of a late payment of pension instalments;
- the interest is likely to be ‘yearly interest’ for tax purposes, and an obligation to withhold income tax is unlikely to arise in most circumstances; and
- the interest element should be covered by the Personal Savings Allowance, although this is primarily a point for individuals and their particular circumstances.
The guidance notes that HMRC may include further clarification in a future newsletter (possibly at the end of May).
The Employment Tribunal has dismissed a claim by an employee that she suffered detriment as a result of becoming a trustee of her employer’s pension scheme: Folarin v Transport for London.
The judge found that there had been no detriment. Amongst other things, they noted that it was reasonable to expect some trustee duties to be undertaken outside standard working hours (in addition to being released for a number of days per year for trustee duties). The employee did not have a right to a reduced workload to reflect her trustee duties (she had been allowed time off to attend meetings and receive trustee training, but was initially expected to produce the same work output as her colleagues).
The circumstances of the case are complex, involving an internal grievance process and an evolving understanding of the time commitment required to be a trustee. It is a useful reminder of the wider context to be considered for trustees who are active employees of the scheme sponsor or group, especially in view of increasing trustee knowledge and governance requirements.
The First Tier Tax Tribunal has found that HMRC was wrong to withdraw a claimant’s Fixed Protection (protection allowing a higher Lifetime Allowance – the amount a person can save over their lifetime in a tax efficient manner) where incorrect auto-enrolment (AE) information had been given: Moan v Revenue and Customs Commissioners.
The claimant had been clear that he did not wish to enter his employer’s pension scheme, to avoid losing his Fixed Protection. He did not, however, complete an opt-out form within one month of enrolment and was therefore enrolled into the scheme. The information provided about his enrolment was incorrect (his AE date was wrong, having been deferred without the proper notice) and the judge found that the deadline for opting-out did not apply until the correct information had been given. Therefore the claimant’s later opt-out had been given in time and Fixed Protection should not have been withdrawn.
The judge also opined that information had been ‘given’ in this case even though the email that was sent may have been missed or deleted by the claimant because it looked similar to ‘junk email’ – if the information in the email had been correct, the claimant’s opt-out notice would not have been in time and he would have lost his Fixed Protection.
The Prudential Regulation Authority (PRA) has released an update on its approach to capital arbitrage transactions. This is aimed at PRA-regulated firms that have conducted, or may be considering conducting, deficit reduction transactions with their DB pension schemes that are structured to limit the resulting regulatory capital impact. The statement flags that these types of transactions may not be compatible with a firm’s obligations, and that the PRA will scrutinise them carefully.
HMRC has published its latest newsletter on the managing pension schemes service (MPSS). It contains information on migrating schemes to the MPSS (which schemes can now do); new features being added to the MPSS; recreating relationships with, or adding new, scheme administrators and authorised practitioners; reporting; making payments relating to charges; financial information; updating details; and schemes without a Pension Scheme Tax Reference (PSTR).
The Pensions Administration Standards Association (PASA) has released guidance for pension scheme administrators on vetting new employees, in response to cases where fraud was undertaken or assisted by employees of pensions administrators. In some cases, individuals have deliberately gained employment with the specific intention of committing fraud. The guidance aims to help administrators to counter this risk.