Get up to speed with this week’s update on UK workplace pensions law and regulation in this week’s edition of The Week In Pensions.
Watch the video update
This week’s pensions legal and regulatory developments
Court of Appeal rules on the long-running equalisation case of Safeway v Newton
The latest ruling in the equalisation litigation for the Safeway Pension Scheme has been handed down by the Court of Appeal. This judgment focuses on the interaction between
- the introduction of the equal treatment rule into pension schemes under section 62 of the Pensions Act 1995;
- the equal treatment requirements of what is now Article 157 of the Treaty on the Functioning of the European Union but which, at the time of the purported amendment, was Article 119 of the Treaty of Rome; and
- a deed of amendment that sought to level down benefits with retrospective effect.
The Court of Appeal has found that Normal Pension Age equalised at age 65 in Safeway Pension Scheme on 1 January 1996. This was the date that section 62 of the Pensions Act 1995 came into force and inserted the equal treatment rule into scheme rules.
The equal treatment rule conferred enforceable rights on scheme members to equalised leveled-up benefits. The Court of Appeal determined that this was an ‘effective measure’ (in line with the requirements set out in the ECJ judgment) that equalised Normal Pension Ages at age 60. As a result:
- the Barber window for the Safeway Pension Scheme was closed on that date (i.e. 1 January 1996); and
- the Safeway scheme’s equalisation deed (dated 2 May 1996) could have its intended retrospective effect to level down to a Normal Pension Age of 65 for men and women in the Safeway Pension Scheme on and from 1 January 1996.
An important point was that the Court agreed with Safeway Limited’s submission that the coming into force of section 62 was sufficient to close the window, commenting:
“Even if EU law requires the Scheme itself to be modified, section 62 has this effect. It cannot make a difference that the modifications are initiated by Parliament rather than the administrators of the Scheme.”
Importantly, from the effective date of section 62 of the Pensions Act 1995 (i.e. 1 January 1996), the EU treaty rights ceased to apply to the equalisation of NPAs. Therefore, the equalisation deed could retrospectively level down benefits, but only on and from 1 January 1996. For the period of accrual from 1 December 1991 to 30 December 1995, EU treaty rights prevented the deed from having its intended retrospective effect.
- Click here for the full text of the judgment in Safeway Ltd v Newton & Ors (Rev 1)  EWCA Civ 869 (13 July 2020); and
- Click here for the PDF version of the judgment in Safeway Ltd v Newton & Ors (Rev 1)  EWCA Civ 869 (13 July 2020).
Chancellor delivers Summer 2020 Economic Update – key pensions announcements
On 8 July 2020, the Chancellor, Rishi Sunak, delivered his Summer 2020 Economic Update. Of interest to pensions practitioners will be the announcement of a new “kickstart” job creation scheme aimed at those aged between 16 and 24 who are on Universal Credit and at risk of long-term unemployment. For each new placement, the government will fund 25 hours’ work a week at the applicable National Minimum Wage, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions. The Chancellor also confirmed that the furlough scheme will finish at the end of October 2020.
The Pensions Ombudsman has predicted a surge in pension scam and ill-health claims due to financial impact of pandemic
Anthony Arter made his comments at a House of Commons Work and Pensions Committee hearing last week in which he anticipated that the number of complaints concerning pension scams and ill-health pension claims will “undoubtedly” increase due to the impact of the COVID-19 pandemic.
“Public sector ombudsmen will be inundated with complaints as a result of Covid-19 and I don’t think pensions will be any exception to that.”
In addition, Arter highlighted another risk for pension savings that, as employers continue to cope with the financial impact of the pandemic, some may fail to pay contributions into pension schemes, or encourage members to opt out of their auto-enrolment schemes.
Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) Regulations 2020 have gone into force
The regulations are made pursuant to the Corporate Insolvency and Governance Act 2020 and provide specific protections for pension schemes during a moratorium and when a restructuring plan is proposed. Broadly, the regulations enable the PPF to participate in key decisions in the process by enabling it to exercise creditor rights that would otherwise be exercisable by scheme trustees. Where trustees lose their rights because of this, the PPF is required to consult with those trustees. The regulations came into force on 7 July 2020.
Guidance released on information regarding moratoriums and restructuring plans
More news from the Pension Protection Fund, the PPF has released guidance on the subject of how to submit information regarding moratoriums and restructuring plans. This follows new restructuring and insolvency requirements that came into force on 25 June 2020 as part of the Corporate Insolvency and Governance Act 2020, which requires restructuring professionals and insolvency practitioners to notify the PPF and share documentation with it in relation to a moratorium or restructuring plan if an eligible pension scheme is involved. This information must also be provided to TPR.
Pension funds play a role in achieving a net zero economy says DWP
Also this week, The Department for Work and Pensions has explained its belief that although there are great risks arising from climate change, the challenges nevertheless present the ‘greatest commercial opportunity of our time’. In an article for the Telegraph, the Pensions Minister (Guy Opperman) stresses the key role that pension schemes can play in seizing these “sustainable opportunities” (for example, through financing green technology). The article also welcomes the recently launched “Make My Money Work” campaign which aims to engage pension savers and encourage sustainable investment. So, overall another indicator of the DWP’s direction of travel as regards climate change risk and green investment and the role pension schemes can play in developing a greener economy (as also evidenced by the recent government amendments to the Pension Schemes Bill).
- Click here for the Pension Minister’s article ‘Pension Funds can be the spring board to real change to a Net Zero Economy’
Highlights from the pensions and national press
Deficits of DB pension schemes increase
Pensions & Investments reports on Mercer’s latest Pensions Risk Survey data which shows that the accounting deficit of defined benefit pension schemes for the UK’s 350 largest listed companies increased from £72 billion at the end of May 2020 to £90 billon on 30 June 2020. Liability values rose by £24 billion to £957 billion at the end of June compared with £933 billion at the end of May. Asset values were £867 billion (an increase of £6 billion compared to the corresponding figure of £861 billion at the end of May).
Negative interest rates a ‘doom loop’ for pension investors?
The Financial Times has focused on the prospect of interest rates being lowered to negative rates, stating that this could be a ‘doom loop’ for pension investors. In the world of pensions, negative rates pose challenges for insurance companies and pension plans that are obliged to use bonds to honour income guarantees to the end-savers. They can also result in people having to save even more to compensate for the prospect of reduced retirement income, with the resulting impact on the economy of lower spending.
The Week In Pensions
The Week In Pensions provides you with a digest of the most important developments in UK workplace pensions law and regulation along with highlighting some of the most interesting stories from the pensions industry and national press.
Pensions at Gowling WLG
Find out more about the pensions team at Gowling WLG and get more detailed Insights and other great pensions content from the team on the Gowling WLG website.