Top of the agenda

  1. Payment of surplus to employer – deadline for resolution
  2. VAT on pension scheme costs: HMRC issues new Brief
  3. Pot follows member and Collective Defined Contribution: delayed not abandoned


  1. O’Brien v Ministry of Justice; Walker v Innospec and others[2015] EWCA CIV 1000
  2. Dutton and Others v FDR Ltd [2015] EWHC 2946


  1. TPR: DC code of practice to be reduced and simplified


  1. Corporate Trustees – Exemption for Pension Schemes
  2. Work and Pensions Select Committee publish report on pension freedoms
  3. Treasury and FCA launch a joint consultation on changes to rules and guidance on access to financial advice


  1. LGPS funds combine to form six £25 billion funds
  2. NAPF rebrands to become PLSA

Top of the agenda

  1. Payment of surplus to employer – deadline for resolution

Schemes with a pre-existing power to pay surplus to the employer under Section 251 Pensions Act 2004 have until 6 April 2016 to pass a trustee resolution to retain that power. Trustees must give at least three months’ notice to the employer and scheme members.

To read our summary of steps which trustees need to take, click here.


Trustees who have not yet passed a resolution should urgently consider whether it would now be appropriate to do so. Trustees of schemes that have passed a resolution should ensure its validity by checking that all formalities were complied with and confirm that a completed copy has been added to the governing documentation for their scheme.

  1. VAT on pension scheme costs: HMRC issues new Brief

On 26 October, HMRC published brief 17/15 on the deduction of VAT on pension fund management costs for DB schemes. There is still no favoured route and the transitional period has been extended. It will now end on 31 December 2016.


We covered this area in detail in our Bulletin for March 2015 here.

HMRC has not yet provided guidance for non-DB schemes or for other types of professional services, however the extension of time is welcome.

  1. Pot follows member and Collective Defined Contribution: delayed not abandoned

In a written statement issued on 15 October, Baroness Altmann announced that the Government will delay implementing Collective Defined Contribution, Defined Ambition and pot follows member automatic transfers. Instead, citing timing constraints and the need to allow the market to adjust to the other reforms underway, being pension flexibilities, auto-enrolment and the new State Pension, she effectively ditched her predecessor’s rapid paced reform agenda.


The UK pensions legislation landscape is one of constant change. Postponing Defined Ambition, Collective Defined Contribution and pot follows member automatic transfers gives the industry time to focus on pension flexibilities, auto-enrolment and the new State Pension. We are certain that one ministerial statement, delaying some policies, does not herald the dawn of a new, slower paced era.


  1. O’Brien v Ministry of Justice; Walker v Innospec and others [2015] EWCA CIV 1000

On 6 October 2015 the Court of Appeal held that pension scheme providers only have to comply with the relevant anti-discrimination laws that were in force when individuals accrued their pension rights.


Mr O’Brien was a part-time recorder on the Western Circuit from 1978 until his retirement in March 2005. Under the Judicial Pension Scheme operating during the majority of O’Brien’s employment, recorders were entitled to all the same benefits as full-time judges, except for pension rights. Mr O’Brien used the Part Time Workers Directive (PTW Directive) to claim that he was entitled to a pension based on the entirety of his service as a recorder.

Mr Walker is a retired member of Innospec’s occupational pension scheme. His claim was that Innospec, in refusing his male civil partner a survivor’s pension, unlawfully discriminated based on sexual orientation. Further background to this case can be found here.

Court of Appeal

The Court held that pension benefit entitlement should be determined on the basis of the EU Law which applied at the time of the period of service. Calculating pension rights on service before the PTW Directive or the Civil Partnership Act 2004 came into effect would give those pieces of legislation unintended retroactive effect.

The Court of Appeal refused to refer the cases to the CJEU.


Commentators have stated that by rejecting the appeals, the Court of Appeal has avoided a £3 billion cost burden falling on schemes which have not equalised benefits beyond the extent to which UK legislation requires them to do so.

For either case to progress any further a successful permission to appeal application must be made to the Court of Appeal, or if that is unsuccessful – to the Supreme Court, within 28 days of the original Court of Appeal decision.

At the time of writing, we understand that the permission to appeal has been refused.

  1. Dutton and Others v FDR Ltd [2015] EWHC 2946

This was a case involving the interpretation of the scheme rules on members' entitlement to pension increases.


Until 1991, the FDR scheme rules provided for 3% per annum fixed increases to pensions payments. Then the rules were amended to provide for increases at the lesser of the increase in the RPI and 5% (5% LPI) for both past and future service.

The Trustees and the Principal Employer agreed this breached the scheme's power of amendment. However, they had different views on the correct interpretation of the amended increase provisions.

High Court

Asplin J. accepted the Trustees' approach. He explained that the rule should be construed so as to give reasonable and practical effect to the scheme, avoiding technicality. In addition, the amendments should be considered against the circumstances and factual situation which existed in 1991, together with the relevant background that would have been available.

He held that the most natural meaning of the amended rule was to blend the old and amended rules for the pre-1991 payments. This involved increasing the pre-1991 pension by the greatest of 3% and 5% LPI. He rejected the Principal Employer's interpretation, which would have produced the lowest additional scheme liabilities.


This case is a useful reminder of the approach that a court will take when it is asked to decide how scheme rules should be interpreted. The only issue in this case was the interpretation of the scheme rules on pension increases, there was no suggestion of any breach by the Principal Employer of the duty of good faith.


  1. TPR: DC code of practice to be reduced in length

On 1 October 2015 Lesley Titcomb, the chief executive of The Pensions Regulator, announced that the DC Code of Practice will be reduced and simplified. TPR intends to consult on the specifics of the new look code and any changes during November 2015. The finalised document will be laid before Parliament in May 2016.


This announcement comes less than two years after the DC Code of Practice came into force. Click here for details of the current code of practice


  1. Corporate Trustees – Exemption for pension schemes

From October 2016, the Small Business, Enterprise and Employment Act 2015 (the “SBEE”) will require all directors to be natural persons. There will be exemptions allowing for the use of corporate directors in certain circumstances and a 12 month grace period (i.e. until October 2017).


While the SBEE will significantly affect the appointment of directors, there will be an exemption for pension schemes. The details of the exemption have not yet been published. We will continue to monitor this and provide updates when appropriate. On the current timeframe, there are still two years before any ban would take effect.

  1. Work and pensions select committee publish report on pension freedoms

The Committee cautioned that pension freedoms could become the “next major mis-selling scandal”. Key messages in the report are:

  • the Pension Freedoms introduced in April 2015 (click here for details) were accompanied by insufficient customer support and information.
  • a dearth of information and lack of regulatory clarity could result in customers finding it difficult to understand the variety of financial products available.
  • the increased size of the pension pots accessible to clients brings with it an increased potential for scamming and financial mismanagement.
  • the financial services industry’s recent record of taking advantage of uninformed customers makes “improvements in guidance and advice” necessary and timely.
  1. Treasury and FCA launch a joint consultation on changes to the rules and guidance on access to financial advice

On 12 October 2015 the Financial Conduct Authority (FCA) launched a joint consultation with HM Treasury into methods of improving access to financial advice for customers. The consultation is seeking to discover what kind of financial advice customers want and whether there is an ‘advice gap’ between what customers want, what customers have access to and what customers can afford.

Identifying a gap and addressing it will make it easier for everyone, rather than a select few, to access financial advice.

This consultation serves as evidence of the industry’s move from a sales-driven advice model to one that prioritises ‘treating customers fairly’. One option being explored in the consultation is the role that ‘robo-advice’ (advice based on computer algorithms) could play in financial services.

The consultation closes on 22 December 2015. We expect the final report will be published in March 2016, prior to the Spring Budget.


  1. LGPS funds combine to form six £25 billion funds

The Chancellor, George Osborne, announced the merger of the 89 LGPS funds on 5 October 2015. The funds will be pooled to form 6 British Wealth Funds, each holding up to £25 billion in assets. This will save “hundreds of millions in costs”. The funds will invest in regional infrastructure.


According to the Chancellor, small local pension funds lack the expertise to invest in infrastructure. Overall, across £180 billion of assets, only 0.5% is invested in such projects. Whereas in countries with larger pooled public pension funds up to 8% of assets are infrastructure and 17% are housing and infrastructure. Clearly, the Chancellor sees the LGPS funds as a vital part of his four point plan, also announced on 5 October, to “get Britain building”.

We note with interest that increasing pension schemes’ investment in infrastructure was a key part of Chancellor George Osborne’s 2011 Autumn Statement.

  1. NAPF rebrands to become PLSA

On 15 October, the NAPF rebranded to better reflect its role in the 21stcentury and became the Pension and Lifetime Savings Association.