Union announces legal action re GMP equalisation

A union representing employees of a major high street bank has announced plans to take legal action in order to force the scheme to equalise benefits as between men and women for the effects of GMPs.  For more information click here.

Court of Appeal finds group companies had implied contract re pension liabilities

In the case of Heis v MF Global, the Court of Appeal has held that there was an implied contract between a trading company (Trading Co) and service company (Service Co) within the same group which required Trading Co to meet the pensions liabilities of Service Co, rendering Trading Co liable for the debt triggered under section 75 of the Pensions Act 1995 triggered by Service Co's administration.  For more detail, click here.

Court of Appeal: contract can still be varied orally even if it provides only written variations valid

In our last Update, we reported on the Court of Appeal's decision in Globe Motors v TRW Lucas in which the Court expressed the view that it was possible for a contract to be varied orally even if it contains a clause saying that any variation must be in writing.  In the Globe Motors case, the Court's view on the oral variations point was not essential to the judgment that it reached overall. Therefore it is not technically binding on other courts. However, the Court of Appeal has now confirmed its view in a further decision in MWB Business Exchange Centres v Rock Advertising, a case in which its decision on the point is legally binding.  The reasoning behind the judgment is that the parties to a contract are always free to agree a variation to the contract by whatever means they choose (including orally)  and that that principle extends to the clause of the contract dealing with variation.


In this case the disputed oral variation appears to have been agreed on MWB's part by a credit controller who "very soon realised that she had gone too far".  However, by that point the binding oral variation had already been agreed.  One key lesson from this case is that if having a telephone (or face to face) discussion about varying a contract, it will generally be advisable to make clear from the outset that any variation is subject to agreement in writing.  A clause specifying a procedure by which contractual variations may be agreed, though not legally watertight, may still be valuable as evidence of whether the parties intended a variation.

Power to change Principal Employer could not be exercised retrospectively

In Shannan v Viavi, the court considered the legal effect of a series of pension scheme documents executed over a number of years where changes to the scheme had purportedly been made retrospectively and/or based on a misunderstanding as to the identity of the principal employer.  Some key findings were: 

  • where a power to substitute the principal employer did not specify any formalities regarding how substitution should be effected, there was no need to imply a requirement for formality; an informal agreement between the parties was sufficient;
  • a power to substitute a principal employer can not generally be exercised retrospectively;
  • where the old principal employer was a wholly owned subsidiary of the new principal employer, consent of the new principal employer to its appointment could also be taken to be consent of the old principal employer to its removal; and
  • a "deed of rectification" which sought to correct a mistake in the documentation could only affect benefits accruing after the date of the deed; it could not reduce benefits already accrued. However, where the deed referred in the recitals to a previous drafting mistake having already been rectified despite this not actually being the case, this was sufficient to rectify that mistake for future benefit accrual.


This judgment provides some helpful indicators to the approach the court may take towards the interpretation of scheme documentation, particularly where mistakes have been made in past documentation, but the key lession is that a failure to properly document scheme changes contemporaneously in accordance with the scheme's trust deed and rules risks leading to legal uncertainty and costly litigation further down the line.

Financial collapse of BHS: MPs' report and inquiry

On 25 July a committee of MPs published a report on the financial collapse of BHS. For more information on the key pensions implications, see our e-bulletin.  Following this report, the Work and Pensions Select Committee announced that it will be holding an inquiry into defined benefit pension schemes.  Specific issues to be considered are: 

  • the adequacy of defined benefit pension scheme regulation and regulatory powers, in general and specifically in relation to the pension schemes of complex and multi-national companies;
  • use of these powers by the Pensions Regulator in recent cases, including BHS;
  • resourcing and prioritisation of the Pensions Regulator's supervisory work;
  • implications of the regulatory approach for company behaviour, including whether it mitigates or incentivises moral hazard;
  • the sustainability of the Pension Protection Fund; and
  • the fairness of the PPF levy system and its impact on businesses and scheme members.

The deadline for written submissions to the inquiry is 23 September 2016.

Developments re Fixed and Individual Protection 2016 and other lifetime allowance protections

HMRC's Pension schemes newsletter number 80 (published 28 July 2016) announced that the new online service for members to apply for fixed or individual protection 2016 is now operational, replacing the previous paper process.  The new service also replaces the online form for applying for individual protection 2014.  The newsletter also states that HMRC is developing a "look up service" to enable scheme administrators to check the protection status of their members. HMRC anticipates that this service will be available later this year.

Pensions Regulator to fine trustees for failure to produce chair's statement

On 29 June 2016 the Pensions Regulator announced its first fine for a failure by trustees to prepare a chair's statement on time.  The requirement to produce a chair's statement applies to schemes which provide at least some money purchase benefits (save where the only money purchase benefits derive from AVCs) and the deadline for doing so is 7 months from the scheme year end.  Unusually, a fine for non-compliance is mandatory, though the Regulator has discretion as to the amount of the fine subject to a minimum of £500 and a maximum of £2,000.  In the first case, the Regulator imposed the minimum fine, taking into account that the trustee had promptly notified the Regulator of the breach and had complied with its obligations 23 days after the deadline.  However, in subsequent cases which involved a breach by a professional trustee, the Regulator has imposed the maximum fine and indicated that this will be its normal approach where a scheme has a professional trustee. 


The past year has seen an apparent increased willingness on the part of the Pensions Regulator to "flex its muscles". The Regulator's latest quarterly bulletin on auto-enrolment compliance shows a rise in the  number of penalties issued for failure to comply with auto-enrolment legislation. Also, the Regulator has recently stated that the Government should consider imposing a mandatory requirement to seek Regulator clearance in relation to some corporate transactions. 

Pensions Regulator's DC Code in force from 28 July 2016

The Pensions Regulator's new code of practice for schemes providing money purchase benefits came into force on 28 July 2016.  On the same date, the Regulator also published in final form its "how to" guides which provide more detail on how trustees can meet the standards set out in the Code.  We have previously reported on the Code in our June 2016 and December 2015 Updates.

Pensions Regulator's Discussion Paper on 21st Century Trusteeship and Governance

The Pensions Regulator has published a discussion paper seeking views on a number of issues relating to pension scheme trusteeship and governance.  Issues raised include whether the chair of trustees or a professional trustee should be required to have minimum qualifications or experience of belonging to a professional body.  The paper states that the Regulator is particularly interested in hearing directly from scheme trustees.  The deadline for responses is 9 September 2016.


Following the UK's vote to leave the EU, the Pensions Regulator issued a statement setting out the approach it expects schemes to take in the light of the vote. For more details, see our e-bulletin. For information on the legal implications of Brexit generally, see the AG Brexit Box.

Pensions Ombudsman upholds Scheme refusal to make transfer to overseas scheme not on ROPS list

The Pensions Ombudsman has upheld a refusal by the NHS Pension Scheme to action a transfer value request which would have involved transferring a member's benefits to a scheme not on the Government's list of Recognised Overseas Pension Schemes (ROPS). For more information, click here.

Pensions Ombudsman upholds death benefit complaint where wrong definition of "Dependant" applied

The Deputy Pensions Ombudsman has upheld a complaint by the partner of a deceased member in relation to the distribution of a lump sum death benefit held on discretionary trusts.  The scheme rules provided for the lump sum to be paid to such of the member's "Relatives" or "Dependants" as the Employer determined. "Dependant" was broadly defined under the scheme rules.  It included not only any person whom the member had supported or with whom the member had resided, but also any person named on an expression of wish form.  The member's partner had not lived with the member, nor had she produced evidence of being financially supported by him.  However, the member had named his partner on an expression of wish form.  The scheme employer and trustees had apparently proceeded on the understanding that the partner could only qualify as a Dependant under the rules if she produced some evidence of mutual dependency.  At the employer's direction, the trustees paid the lump sum to the member's father.

The Deputy Ombudsman upheld the complaint made by the member's partner and ordered the scheme employer to reconsider its decision.  She also awarded the complainant £500 for distress and inconvenience.


This case illustrates the importance of considering whether terms used in a trust deed and rules are defined terms, and if so, whether the definition gives words a different meaning to what would ordinarily be their natural meaning.  A failure to understand the meaning of a rule dealing with the distribution of lump sum death benefits may result in a decision made under the rule being open to legal challenge.

Ombudsman decisions show approach to awarding interest will vary with circumstances

Two recent Pensions Ombudsman decisions illustrate that the question of whether the Ombudsman will award interest in relation to late payment of benefits will be dependent on the facts of the case.  For more information click here.

Data Protection - EU Member States approve new EU/US Privacy Shield

In our March 2016 Update we reported  that the European Commission and US authorities were working on a replacement for "Safe Harbor" following the ruling by the Court of Justice of the European Union that the safe harbor regime was invalid. On 8 July the European Commission announced that Member States had approved the adoption of the new EU-US Privacy Shield.  The data protection authorities of the EU member states have announced that they will not seek to challenge the deal for at least a year. 

Auto-enrolment developments

Following the Brexit vote, Richard Harrington replaced Ros Altmann as pensions minister. The minister has confirmed the Government's continued commitment to auto-enrolment. A review of auto-enrolment is scheduled for 2017, but the minister has made clear that the review will be about the detail, not the principle.  Other areas of focus listed by the minister include protecting people from "excessive" exit fees, tightening the regulation of master trusts and reviewing the services provided by Pension Wise. 

Regulations have been made to give effect to the announcement in the Chancellor's Autumn Statement 2015 that the two transitional periods under auto-enrolment legislation (which determine the minimum rate of contributions payable) will be extended so that the first transitional period will end on 5 April 2018 instead of 30 September 2017 and the second transitional period will end on 5 April 2019 instead of 30 September 2018.

In a separate development, the DWP has issued a call for evidence on possible changes to NEST, including whether employers should be able to contractually enrol workers into NEST, and whether the options available to members for accessing their NEST benefits should be expanded.

Court of Justice of European Union to consider pensions rights of same sex partners

The Court of Justice of the European Union (CJEU) will consider the issue of pension rights in relation to same sex partners in the case of Dr David L Parris v Trinity College Dublin.  The case concerns an Irish pension scheme, the rules of which provide that a survivor's pension will only be payable to a member's spouse or civil partner on the member's death if the marriage or civil partnership was entered into before the member reached age 60 or retired, whichever is the earlier.  The member bringing the claim has lived in a relationship with his same sex partner for more than 30 years.  He entered into a civil partnership in the UK in 2009 at the age of 63.  His civil partnership was only recognised under Irish law with effect from 12 January 2011 following a change in the law. It would have been impossible for him to enter into a legally recognised relationship with his civil partner before age 60. 

The Advocate General, whose opinions are not binding but are often followed by the CJEU, has stated in her opinion that that the provision in the scheme rules conflicts with EU law on equal treatment.


UK pension scheme rules sometimes contain provisions designed to avoid liability to pay a spouse's pension in the event of a "death bed marriage" (ie a marriage which may have been entered into specifically for the purpose of conferring pension rights), so the case could be relevant in the UK in that context.  Of more importance is whether the CJEU decision may contradict the decision of the Court of Appeal in Walker v Innospec, which upheld the legality of UK legislation which allows survivor benefits for same sex spouses/civil partners to be calculated only by reference to pensionable service on or after 5 December 2005.

Insurance Act 2015 comes into force

The Insurance Act 2015 came into force on 12 August 2016.  It is the first major overhaul of business insurance law since 1906.  From a pension scheme trustee perspective, key areas where the Act may be relevant are in relation to trustee liability insurance or where trustees are securing benefits by means of annuity policies.  The Act introduces a new concept of a duty on the policyholder to make a fair presentation of the risk, ie to disclose in a reasonably clear and accessible matter every material circumstance which is known or ought to be known to the policyholder and those responsible for the policyholder's insurance. (The Act clarifies that a policyholder ought to know what would have been revealed by a reasonable search.)  The consequences of failure to comply with the duty vary according to the seriousness of the breach.  A deliberate or reckless failure to comply entitles the insurer to avoid the policy.  In other cases, the consequences will depend on what the insurer would have done had it known the true facts.  For more detail on the Insurance Act 2015 generally, see our e-bulletin.


Whilst the Act makes some significant changes to concepts in insurance law, it is basically good news for policyholders, as the old legal framework put a very high duty of disclosure on policyholders and gave insurers draconian rights to treat insurance contracts as never having existed if the policyholder failed to comply.  From a policyholder's perspective, the Act takes a more nuanced and proportionate approach to a failure to disclose information.  Insurers are entitled to contract out of most elements of the Act, but must draw this to the attention of the policyholder.  Trustees should always review carefully the terms of any insurance policy to ensure that they fully understand its terms.