Pensions: What's new this week 27 April 2020
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Welcome to your weekly update from the Allen & Overy Pensions team, bringing you up to speed on the latest legal and regulatory developments in the world of occupational pensions.
Listen to our latest podcast or read the full version of 'What's new this week' below to find out more information on the stories that matter to you.Contact us if you would like to receive our weekly audio update or full briefing by email on Monday mornings.
There are limited updates this week on new Covid-19 developments:
- A number of employers have now made claims under the Coronavirus Job Retention Scheme (CJRS). You can read more about the CJRS in our updated FAQ document.
- The Pensions Regulator (TPR) has added Covid-19 specific content to its guidance on avoiding pension scams, including suggestions for social media posts.
- The Pensions Ombudsman has begun accepting new complaints again, after announcing in March that it was placing a temporary moratorium on new complaints.
TPR: proposed powers to obtain communications data
The government has laid draft regulations before Parliament which would add TPR, as well as certain other public bodies, to the list of public authorities with powers to obtain communications data under the Investigatory Powers Act 2016. TPR may be authorised to obtain communications data where this is necessary for an ‘applicable crime purpose’. The draft regulations must be approved by Parliament and, if so, would come into force on the day after they are made.
This follows other proposals to extend TPR’s investigatory powers – in particular, the Pension Schemes Bill, currently before Parliament, contains proposals to extend TPR’s information-gathering powers, as well as introducing new civil and criminal sanctions for breaches of pensions legislation. You can read more about the Bill here.
Latest RPI/CPI court ruling
In the latest in a line of cases about the interpretation of indexation provisions, the High Court has decided that scheme rules required increases to pensions in payment to be calculated in line with RPI (not CPI), dismissing an appeal against an earlier determination by the Pensions Ombudsman (TPO): Carr v Thales Pension Trustees Ltd.
The relevant rule stated that the rate of annual increase to pensions in payment was ʻthe percentage increase in the retail prices index over the year ending 30 September in the calendar year prior to that in which the increase is due to take place subject to a maximum of 5 per cent [limb 1] as specified by order under Section 2 of Schedule 3 of the Pension Schemes Act [limb 2]ʼ. At the time the rule was drafted, the orders referred to were based on RPI (but are now based on CPI).
Mr Carr complained to TPO after the trustees informed pensioners that increases should have been based on CPI (not RPI) since 2011, and that the change would be made retrospectively (but the trustees would not be seeking to recover overpayments to members). TPO concluded that the rules required percentage increases based on RPI capped at 5%.
The High Court analysed the two parts of the rule (labelled as limbs 1 and 2 above) – since 2011, these limbs had been inconsistent because of the RPI/CPI issue. Mr Justice Nugee considered that the natural and ordinary meaning of the rule was that ʻlimb 1ʼ of the rule was to be given primacy, and that there was no reason for departing from this interpretation. Therefore, the rate of increase was to be calculated in line with RPI capped at 5%.
Employer loan: scheme sanction charge payable
The Upper Tribunal has ruled that the sponsoring employer of a scheme (BFL) was liable to a scheme sanction charge, in its capacity as the scheme administrator, in relation to an employer loan: HMRC v Bella Figura Ltd.
It was not disputed that the loan was an unauthorised employer payment (because it did not meet the statutory requirements for an authorised employer loan – for example it was not secured by an effective charge of adequate value). The Upper Tribunal found that BFL reasonably believed that the loan was authorised for the purposes of the Finance Act 2004, was not deliberately seeking to circumvent the 2004 Act, and had made a ʻgenuine and good-faith attemptʼ to comply. The loan had also been repaid, so there was no loss to the scheme. Although the Upper Tribunal set aside an unauthorised payments charge and surcharge on the basis that these were out of time, it considered it would be inappropriate to exercise its discretion to set aside the scheme sanction charge of GBP80,000 (because this would mean BFL was not liable to any charge despite having made a significant scheme chargeable payment).