Issues affecting all schemes

Changes to relief at source

HMRC has published a policy paper describing the changes that will be made to the administration of relief at source as a result of the introduction of the Scottish rate of income tax. HMRC has also published issue 95 of its Pension Schemes Newsletter which contains further details of the changes.


Schemes should liaise with their administrators to ensure that they are making the necessary changes to the scheme’s administration processes to reflect the changes to relief at source.

Land and buildings transaction tax on scheme mergers

Revenue Scotland has announced that, following representations, it has concluded that land and buildings transaction tax (LBTT) will not generally be chargeable on transfers of land between schemes as part of a scheme merger. (LBTT is the Scottish equivalent of stamp duty land tax.) However, LBTT will be chargeable on any money or money’s worth given for the transfer of land to or from a scheme. Previously, Revenue Scotland had taken the position that LBTT was chargeable on transfers of land as part of a scheme merger.


Schemes which have paid LBTT on a transfer of land as part of a scheme merger should consider whether they wish to seek repayment of the tax paid.

Benefit changes and age discrimination

The Employment Appeal Tribunal (EAT) has held that transitional provisions in the regimes establishing the new judicial and firefighters’ pension schemes were pursuing legitimate aims. Under the transitional provisions, current judges and firefighters were compulsorily transferred to the new schemes which offered less favourable benefits. Some older judges and firefighters were entitled to remain in the old schemes until either retirement or the end of a tapered period, depending on their age.

However, the EAT agreed with an employment tribunal’s decision that the transitional provisions for the new judicial pension scheme were not a proportionate means of achieving those legitimate aims and therefore constituted unlawful age discrimination. In relation to the new firefighters’ pension scheme, the EAT held that an employment tribunal had erred in the level of scrutiny it applied when deciding whether the transitional provisions were a proportionate means of achieving the legitimate aims. The EAT therefore remitted the question of proportionality in that case back to the tribunal for reconsideration.

Lord Chancellor and Secretary of State for Justice and another v McCloud and others [2017] UKEAT 0071_17_2901 and Sargeant and others v London Fire and Emergency Planning Authority and others [2017] UKEAT 0116_17_2901


Schemes wishing to make benefit changes should consider whether those changes have a potentially discriminatory effect on members due to their age and, if so, whether the changes are objectively justified as a proportionate means of achieving a legitimate aim.

Issues affecting DB schemes

2018/19 PPF levy – contingent assets

The PPF has published the finalised versions of its updated standard form contingent asset agreements and accompanying guidance. The new standard forms must be used for any contingent assets entered into on or after 18 January. Agreements with an earlier execution date that have not previously been submitted to the PPF, and re-certifications (where the original certification was completed using an earlier version of the standard form agreements) can still be submitted for the 2018/19 levy without re-execution on the new forms.

For the 2019/20 levy year, the PPF anticipates that Type A (group company guarantee) and B (charge over cash, land or securities) contingent assets that include a fixed cap will need to be re-executed on the new standard forms by the deadline for that levy year (the end of March 2019) if they wish to receive levy credit.


Schemes wishing to enter into and certify a contingent asset for the 2018/19 levy year should ensure that they use the new standard forms. Schemes with existing Type A and B contingent assets should check whether they will need to re-execute them on the new standard forms for the 2019/20 levy year.

White paper on DB pensions reform

The government has confirmed that the white paper on DB security and sustainability will now be published in the spring and that it will contain proposals to strengthen the Pensions Regulator’s powers, including a requirement for compulsory clearance of some corporate transactions and enhanced information-gathering powers. Other possible areas for reform include a power for the Regulator to issue punitive fines and changes to the statutory insolvency priority order.


No action required.

Power to change indexation measures

The High Court has held, among other things, that:

• Where a scheme’s pension increase rule permitted the scheme’s indexation measure to be changed if RPI had become “inappropriate”, the question of whether RPI had become inappropriate was an objective question, rather than an issue for the employer and/or the trustees to decide.

• Matters and events identified by the employer had not, whether by themselves or in combination, caused RPI to become inappropriate. These matters/events included, among many others, the government’s 2010 decision to use CPI as the basis for calculating statutory pension increases, the UK Statistics Authority’s 2013 assessment that RPI does not comply with the Code of Practice for Official Statistics, and the 2015 Johnson Review’s recommendation that the Office for National Statistics adopt CPIH as its main measure of inflation.

British Telecommunications plc v BT Pension Scheme Trustees Limited and another [2017] EWHC 69 (Ch)


Schemes with a power to change their indexation measure where the existing measure has become inappropriate or no longer suitable should bear the Court’s judgment in mind when deciding whether they can exercise the power to change their existing indexation measure.

Effectiveness of closure to accrual and breaking of final salary link

The High Court has held that a fetter in a scheme’s amendment power against amendments which prejudiced or adversely affected the rights of any member only applied to past service rights. The parties agreed that the fetter preserved a final salary link.

The Court also held that an amendment introducing a new employer power to terminate contributions was valid notwithstanding the fact that it engaged the fetter in the amendment power by removing one of the restrictions in the previous power. The restriction removed required it to be “impracticable or inexpedient” for an employer wishing to exercise the power to continue to participate in the scheme. The Court held that the amended power was subject to an implied limitation that it could only be exercised if it was impracticable or inexpedient for the employer to continue to participate in the scheme.

The Court decided that there were sufficient factors at the time that the scheme employers exercised the termination power for them to have legitimately concluded that it was impracticable and inexpedient for them to continue to participate in the scheme, and that the termination notices issued were therefore effective to close the scheme to future accrual and to break the final salary link.

Wedgwood Pension Plan Trustee Limited v Salt [2017] EWHC 79 (Ch)


Schemes should consider whether proposed amendments to scheme rules engage any fetters in the amendment power, even where the proposed amendments do not directly impact members’ benefits.

Issues affecting DC schemes

Changes to provision of information requirements

Regulations have come into force which:

• make consequential changes with effect from the 2017/18 tax year to the provision of information requirements for registered pension schemes to reflect the reduction of the money purchase annual allowance to £4,000; and

• introduce a new requirement with effect from the 2018/19 tax year for scheme administrators to notify HMRC if the scheme becomes or ceases to be an authorised master trust.


Schemes should liaise with their administrators to ensure that they have factored the changes to the provision of information requirements in relation to the money purchase annual allowance into the scheme’s administration processes.