Pensions: what’s new this week - 5 September 2022
05 September 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: Judicial review of RPI changes: High Court rejects challenges; HMRC Pension Schemes newsletter.
The UK Statistics Authority (UKSA) confirmed in late 2020 that it intends to reform the Retail Prices Index (RPI) by adopting the methods and data sources of the Consumer Prices Index, including owner occupiers’ housing costs (CPIH). The reforms will not be implemented before 2030; at that point the UKSA will also discontinue supplementary and lower level indices of the RPI. The government has stated that it will not offer compensation to the holders of index-linked gilts.
Pension schemes holding RPI-linked gilts or derivatives as part of a liability-matching strategy could, as a result of these reforms, see the total value of their assets fall without a corresponding decrease in their liability values, leading to a deterioration in funding position. Three such schemes joined together to seek a judicial review of various issues, including the decision to amend RPI to align with CPIH and the Chancellor’s decision that no compensation would be payable.
The High Court has rejected these claims, determining that the UKSA has the power to make fundamental changes to RPI by incorporating the methodology and data sources of another index into RPI (as an alternative to replacing RPI with a different index). It did not accept that there had been a failure to take into account the impact of the changes on the interests of those affected either by the UKSA (which the Court said was essentially concerned with ensuring that statistics are fit for purpose) or by the Chancellor in reaching his decision on compensation; nor that there had been a failure to carry out appropriate consultation on the merits of the reforms. The Court also ruled that the changes will not mean that RPI will cease to be published when the reforms are implemented (some index-linked gilts include clauses requiring the designation of an alternative index in the event of the cessation of RPI, but the Court’s view is that these will not be triggered).
For members whose benefits are linked to RPI, the change is likely to result in reduced benefits over the course of their lifetime. At a scheme level, the impact will vary depending on scheme rules and on the details of their liability matching strategy. Trustees should check whether their scheme rules include any relevant triggers for reviewing the index in light of the future reforms. The parties to the case are understood to be considering whether to seek leave to appeal the ruling.
HMRC has published Pension Schemes Newsletter 142, which provides links to Pensions Tax Manual updates reflecting the increase to the normal minimum pension age from 6 April 2028, and refers to the Pensions Regulator’s new strategy for combating pension scams (published on 3 August).
The newsletter also covers a number of issues relating to scheme administration, including: outstanding annual returns where scheme administrators have submitted interim repayment claims for 2022-23 (returns and declarations must be successfully submitted by 30 September 2022); a reminder that annual claims for 2020-21 by schemes operating relief at source must be submitted by 5 October 2022; guidance on how claim forms can be submitted; and practical tips on migrating schemes to the Managing Pension Schemes service and submitting Accounting for Tax returns.