Developments in Employee Benefits law and practice

22 September 2019

DC Future Book 2019

The Pensions Policy Institute (PPI) has published the fifth edition of The DC Future Book. This research outlines available data on the DC pension's landscape and explores current trends. It also explores how changes in governance and investment strategy could improve member outcomes.  

TPR updates DB investment guidance

The Pensions Regulator has published updated guidance for trustees of defined benefit pension schemes on issues to consider when investing scheme assets. Key changes are:

  • Revisions for the new disclosure requirements concerning financially material and non-financial factors, and stewardship activities, which come into force from 1 October 2019.
  • Updates in relation to requirements for the appointment and retention of fiduciary managers, and the setting of objectives for investment consultants.

Governance and administration risks in public service pension schemes

This report contains findings from the Pension Regulator’s engagement with 10 local government funds, selected from across the UK, to understand scheme managers’ approaches to a number of key risks. As part of each engagement TPR fed back on good practice and suggested improvements that could be made. Four key areas are identified for improvement:

  1. key person risk, 
  2. pension board management, 
  3. protecting members from scams, and
  4. handling employer-related risks. 

The report includes case studies, which TPR believes would be helpful to the public service pension scheme community as a whole, including with regard to compliance with its Code of Practice 14 (governance and administration of public service pension schemes).

Employer not to blame for worker who lost Fixed Protection after being auto-enrolled

In this Ombudsman determination, Mr T (PO-23961), the Ombudsman found that a new employer was not to blame when employee invalidated fixed protection by failing to opt out of the workplace pension scheme after being automatically enrolled into it.

Mr T had worked for a large UK bank and accrued a substantial pension entitlement. He successfully applied for lifetime allowance Fixed Protection 2012. 

He then moved jobs and became a visiting lecturer at the University of Hertfordshire. 

The University sent him a letter stating that he would be automatically enrolled in the Teachers’ Pension Scheme but had the right to opt out.

In April 2018, Mr T was informed by his independent financial adviser that he had invalidated his Fixed Protection by contributing to the Scheme. Mr T wrote to the University asking for a refund of his pension contributions but was told that this was not possible because he now had over two years’ worth of contributions.

Mr T complained and, after going through the scheme dispute procedure, the case reached the Pensions Ombudsman.

The Ombudsman held there was no requirement under the Disclosure Regulations for Teachers Pension or the University to provide new scheme members with guidance about lifetime allowance protections. Mr T could have opted out before the opt out deadline and should have realised the position with regard to the terms of his Fixed Protection much sooner than he did. 

The Ombudsman did though add that the issue of Mr T invalidating his Fixed Protection was a matter to be decided between Mr T and HRMC. He highlighted the recent tax tribunal case, Hymanson v HMRC, in which the tribunal held that, where a taxpayer who had been granted a certificate of fixed protection made a mistake as to the tax consequences of continuing to make payments into a registered pension scheme, the remedy of rescission of the payments would be available.

NEST to offer IHT exempt death benefit option

NEST has introduced a new option for members that will make their pension pots exempt from inheritance tax (IHT). Members will be able to complete an expression of wish form and, following their death, NEST will then exercise discretion over lump sum death payments, taking into account the beneficiaries listed on the form. Until this change, NEST members could nominate a beneficiary and their pension pot would be paid to the beneficiary as of right. Consequently, members’ pension pots would be considered to form part of their estate for IHT purposes.

Brexit update

On Tuesday 16 September, the Supreme Court began hearing the appeals in the two cases relating to the lawfulness of the prorogation of Parliament. The judgment is expected early in the week commencing 23 September.

Julian Rowe | Policy, Professionalism & Research | email: