We hope that our readers had a good break over Christmas and we send our best wishes to you all for the year ahead.

In this bumper issue, we discuss the Pensions Regulator (TPR)’s busy end to last year, which has continued into a busy start to 2017, issuing a discussion and response paper on trusteeship and governance and a short guide on integrated risk management. We also touch on activities at HMRC and in the Pensions Ombudsman (PO)’s office, and discuss a few other interesting developments.

At a glance:

  • TPR favours £255 million settlement to protect members’ benefits rather than formal exercise of “moral hazard” powers

  • TPR issues its discussion and response paper on 21st century trusteeship and governance

  • TPR issues its short guide to integrated risk management

  • TPR’s Upper Tribunal dismisses strike-out application after reconsideration

  • HMRC and new provision of information requirements for lump sum death benefits

  • HMRC clarifies effective date for lifetime allowance protection

  • PO case on transfer values


Coats Group Plc has agreed to pay £255 million to safeguard the benefits of around 24,000 pension scheme members after TPR took anti-avoidance action in issuing warning notices in 2013 and 2014,exercising its power to issue Financial Support Directions (FSD) in respect of three defined benefit schemes in the Coats corporate group.

This demonstrates TPR’s willingness to work with scheme sponsors and trustees to protect members’ benefits even where it has invoked its “moral hazard” powers. In this case, the corporate group avoided being the subject of a Determinations Panel investigation and, according to TPR, the settlement will “substantially improve the funding of the schemes and also strengthen the employer covenant supporting them.”


In December, TPR published its discussion and response paper on 21st century trusteeship and governance, following on from an earlier paper aiming to stimulate discussion with the industry on governance and administration failings. The response paper concentrates on private trust-based defined benefit and defined contribution schemes. But its principles have a wider application to cover public sector schemes too. It reports comments from industry on a selection of topical themes.

Taking governance first, TPR acknowledges the significant feeling that there should not be unnecessary regulatory burden imposed on well-run schemes. TPR reported that respondents to its earlier questioning paper highlighted their view that TPR should concentrate on supporting trustees facing challenges in their management of schemes where the governance standard is lacking.

Other questions to which respondents gave their views related to continuing education for trustees (the response to this was favourable), a probationary period for new trustees (this was rejected on the grounds that it would discourage potential new trustees) and stricter requirements for professional trustees to demonstrate their expertise (respondents favoured this idea).

Having assimilated the responses to the paper, TPR has announced its aim of continuing to improve standards for trust-based schemes by (i) offering more targeted education and tools for trustees; (ii) setting out clearly the standards it expects of professional trustees; and (iii) using “tougher” enforcement against trustees who fail to meet the expected standards.


Also in December, TPR published its “quick guide to integrated risk management” for trustees of smaller defined benefit schemes. According to TPR, integrated risk management (IRM) is an efficient way for trustees to identify and manage risks around the employer covenant and the funding and investment strategies, emphasising how they are inter-dependent. IRM examines the inter-relationship and identifies how a change in one area can influence the other areas.

Trustees should refer to TPR’s guidance on this at http://www.thepensionsregulator.gov.uk/docs/irm-quick-guide.pdf for further information.


The Upper Tribunal, the independent body set up to hear references on determinations, has clarified the test for considering matters raised by TPR which go beyond a WN issued for an FSD. The tribunal here was reconsidering a strike out application brought by the targets of an FSD in relation to a continuing case concerning the Box Clever Group Pension Scheme, after the targets’ successful appeal against the FSD last year.

The tribunal reviewed the judgment that the WN represented an important notice for targets in explaining the case in a comprehensive and clear manner. It commented that this test was “essentially simple, although its application may be less so”.

In this case, the tribunal dismissed the targets’ application seeking the strike out of certain allegations raised by TPR (and the trustee). It concentrated on two key factors in the case. Firstly, it found that the new arguments were based on facts already identified and considered. Secondly, its view was that the new arguments had been raised in response to the targets’ case. Further, the tribunal considered that there were no problems with difficulty or undue delay in the case which would preclude the parties from dealing with the new arguments.

So it is clear that targets must find new and compelling arguments based on facts not already deliberated upon for a successful strike out action to be made out.


HMRC has published new draft regulations that will bring in the provision of information requirements where a registered scheme pays certain taxable lump sum death benefits to a trust. The intention is to give beneficiaries all the information they need to claim a refund of any excess tax deducted by the scheme administrator above the income tax due at their marginal rate.

Under the proposals, where a scheme pays lump sum death benefits to a trustee having deducted the special lump sum death benefits charge, the scheme administrator will be responsible for giving the trustee certain information within 30 days of payment. The trustee will then be obliged to pass on this information to the beneficiary within 30 days of payment to the beneficiary. The information includes the amounts of the lump sum and tax charge, details of the deceased member (including date of birth) and details of the scheme making the payment.

Since 6 April 2016, in most forms of authorised lump sum death benefits paid in respect of a member who died after reaching the age of 75 to company directors, business partners and trustees (other than bare trustees), all of whom are “non-qualifying persons” for HMRC, the scheme administrator is liable for the flat rate 45% special lump sum death benefits charge. In contrast, payments to “qualifying persons”, essentially all other individuals or bare trustees, are subject to income tax at the recipient’s marginal rate.


Edition 82 of HMRC’s pension scheme newsletter discusses a number of topics from scheme administrators and trustees, notably concerning the effective date for the three forms of lifetime allowance protection which individuals may currently claim.

For fixed protection 2016 and individual protection 2016, the protection applies from 6 April 2016 or, where the individual has a pre-existing form of protection, from any later date when the existing form of protection ceases to apply.

As regards individual protection 2014, this applies from April 2014 unless claimed where the individual has a valid and current protection; in that case, the protection applies from the date when the existing form of protection ceases.


The broad aim of the new Pension Schemes Bill 2016 -17 is to improve member protections. The key proposals are a new authorisation regime for master trusts, requiring them to demonstrate to TPR that they satisfy certain key criteria on establishment; a boost to TPR’s supervisory powers, so that it will keep under check the authorisation of master trusts during their existence; and a strengthening of existing legislation on exit charges. The bill is expected to receive Royal Assent during the first half of this year and, once passed, will become the Pension Schemes Act 2017.

Since the introduction of automatic enrolment in October 2012, many “master trusts” have entered the pensions market -umbrella arrangements with the structure of a trust, which is managed by trustees, whilst allowing individual employers to have their own dedicated section. Industry bodies run some master trusts whereas others have been set up by insurance companies and investment / administration managers. What they all have in common is the ability to operate as a multi-employer occupational scheme on a large scale. There were over four million members in master trusts by the start of 2016.

The intention is for the new regulatory regime to encompass master trusts which have already been set up as well as applying to new trusts. There will be specific requirements on trustees for winding up or closing master trusts. TPR’s new powers will be to verify that master trusts meet the standard required whilst in existence and remain “authorised”. TPR will have the power to cancel authorisation where a master trust fails to satisfy the strict rules. TPR will also be given new powers to intervene where schemes are at risk of failing, including issuing penalty notices, and the ability to cancel authorisation where schemes fail.

TPR has welcomed the proposals for new supervisory powers for master trusts. But the detail of the new powers will be prescribed by regulations and the House of Lords’ Delegated Powers and Regulatory Reform Committee has reported concerns about the apparently wide powers for the Secretary of State to make regulations on “significant events” for master trusts which will be reportable to TPR, suggesting that the Government has “not yet decided on the policy or the purposes for which the power is to be used” and, moreover, the power is “inappropriate in the absence of any convincing reasons to justify its scope”.

We think that there is a need for changes and for increasing controls like this. Indeed, this has been clearly demonstrated by TPR’s issuing of fines to a number of master trusts under its general governance remit. The fines were for failing to complete a chair’s statement. TPR made the following comments: “Completion of the chair’s statement is a basic requirement of good governance and we expect trustees to comply.” This considered, we would nonetheless hope that the new changes and controls will not lead to creeping regulation, perceived interference and burdensome requirements antagonising employers who want to do the right thing by their employees.


With overseas living becoming all the more popular, a High Court case has confirmed that pension sharing under section 24B of the Matrimonial Causes Act 1973 is not available in relation to pensions built up overseas.

Nonetheless, Mr Justice Mostyn (Mostyn J) observed that there is no automatic bar to making a pension sharing order against an overseas pension. But he noted that one would only be achievable, for practical purposes, by private agreement supported by undertakings to obtain an order in a foreign jurisdiction to split the pension and where there is a foreign pension provider willing and able to give effect to the agreement.


The Pensions Ombudsman (PO) has given an unequivocal reminder to trustees to preface any benefit estimates with a clear statement that values are not guaranteed. In a recent case, the PO has found that an active member of a defined benefit scheme wishing to transfer to a defined contribution scheme was not treated unfairly by trustees who did not give a three month guarantee on a cash equivalent transfer value (CETV) statement, as they would have done in the case of a deferred member.

The PO has dismissed a complaint by a member whose initial CETV statement was reduced by around £42,000 following a change in the scheme’s CETV basis one month after the date of the statement. The PO reasoned that the statement contained clear warnings that the given CETV was not guaranteed. Moreover, the PO found that the trustees treated the member fairly and in the same way as any other active member in imposing a one month notice period and in complying with legislation, and that they were not under a statutory obligation to give the member a three month guarantee as she was not a deferred member.