In this chapter of our Annual Insurance Review 2020, we look at the main developments in 2019 and expected issues in 2020 for pensions.

Key developments in 2019

Operators of self-invested personal pensions (SIPPs) continued to face significant challenges in 2019.

FOS complaints data demonstrates that SIPP complaints have grown rapidly over the last ten years, from fewer than 400 complaints in 2008/2009 to almost 4000 in 2018/2019. Interim data suggests that complaint numbers for 2019/2020 are likely to remain at this high level. We have also seen similarly high increases in civil claims.

In these difficult conditions several SIPP operators ceased to trade in 2019, which led to the Financial Services Compensation Scheme (FSCS) awarding compensation to SIPP members. This may well lead to the FSCS pursuing recoveries against insurers in due course.

Berkeley Burke was amongst the operators entering administration last year, resulting in its appeal of its failed judicial review of an adverse FOS decision falling away. This leaves SIPP operators in a position where they are likely to struggle to defend FOS complaints unless they can establish that they conducted appropriate due diligence. The FCA then compounded SIPP operator concerns by immediately asking them to consider whether the outcome of the Berkeley Burke case called into question their ability to continue to trade. The FOS also reminded firms that where FOS decisions went against them they should consider proactively contacting customers who have not complained, to give them an opportunity to obtain redress.

SIPPs are likely to remain a topical issue in 2020 as we await the delayed judgment in the case of Adams v Carey Pensions, where the Court is considering SIPP operators' legal duties. Many SIPP operators are also seeing complaints relating to the Elysian Fuels investment, alleged to have been a tax-avoidance scheme involving the sale of shares by members into their SIPPs.

What to look out for in 2020

Over the coming year we can expect to see yet more regulatory scrutiny on pensions.

Master Trusts now have to be authorised by the Pensions Regulator (tPR) and over the last year 37 schemes have obtained authorisation, with many other providers dropping out of the market. tPR has made clear that Master Trusts, which hold 16 million pension pots, will be heavily supervised, with a higher intensity of supervision for those schemes presenting a higher risk due to size, complexity and previous record. This will be of interest to the insurers of Master Trust trustees but the high standards to which tPR intends to hold Master Trust trustees will no doubt have an influence on the wider pension trustee market in due course.

The government also demonstrated a commitment to increased regulatory scrutiny for pensions by introducing the Pension Schemes Bill in the recent Queen's Speech, which introduced major new powers for tPR. This proposed: the introduction of new criminal offences and civil penalties around avoiding employer debts and risking accrued benefits; further grounds for the issuing of Contribution Notices; and new information gathering powers. Whether these proposals become law will depend upon the outcome of the general election but they are symptomatic of a wider picture of increased regulation of pensions and are likely to have broad cross-party support.

2020 will also see further judicial guidance on the equalisation of guaranteed minimum pension (GMP) benefits, expected following the Court's scheduled further hearing in Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank plc and others, in April/May 2020. Many schemes were left in limbo by the Court's initial ruling in October 2018, which held that schemes have an obligation to equalise GMPs but left unanswered a number of related practical questions.