Current Issues in Pensions (12 November, London): Review of session on 'Current developments from the world of pensions law'

In her talk, Helen provided the latest position and some useful background on various pensions legal issues.

Hybrid Schemes – Money Purchase

Helen noted that Hybrid Schemes have continued to produce problems, following the Deparment for Work and Pensions (DWP) legislation setting out the definition of Money Purchase benefits. Different results can arise for different members of the same scheme. If the defined benefit (DB) underpin bites then the benefit is DB whilst if the Money Purchase underpin bites, the benefit is Money Purchase. The DWP is intending to consult on legislation intended to differentiate between Protection Provisions and Benefit provisions, with a view to producing legislation in October 2013.

Test Achats

The situation regarding whether sex-specific scheme actuarial factors can still be used has not been tested in the courts so far. Pension schemes have their exemption from Equal Treatment under the Equal Treatment Directive, (whilst insurers had theirs under the Gender Directive, which was challenged and declared invalid). The pension schemes continuing exemption means that for instance: 

• bulk annuities purchased by trustees do not need to be unisex; and
• scheme factors even for  Defined Contribution (DC) benefits can continue to be sex specific.

 Helen noted that the European courts have signalled that they do not like gender specific factors and that we cannot rule out another test case which would challenge the Equal Treatment directive.

Guarnteed Minimum Pensions Equalisation

There have been no further developments since the consultation closed last April.Helen noted that many lawyers are of the opinion that Guaranteed minimum pensions (GMPs) do not have to be equalised as they are not ‘pay’, since they are Social Security substitute benefits and therefore are not protected by Article 157. She also noted that the DWP’s method rounds up and that there is no obligation to follow it.

Incentive Exercises

The Code of Good Practice which was issued in June 2012 is not statutory. However, it states that it is expected that all future Incentive Exercises (IEs) will follow the spirit and the principles of the Code. There is a possibility that legislation on IEs will follow. Helen noted that there were areas where the trustees could feel drawn in and have responsibility for deciding how and to what extent they should protect members’ interests. She noted that the legal basis for an IE could be complex, say with Section 67 implications   trustees have to consider Data Protection issues before releasing data and should be aware of conflicts of interest. 

RPI

Helen outlined the main options between Retail Price Index and Consumer Price Index (RPI/CPI) and a new index RPIv2. She set out the intended timetable for the consultation process, which is intended to result in implementation in March 2013.

Upcoming Cases

Helen rounded up with a list of the cases and judgments expected in the next few months.