Developments in Employee Benefits law and practice

02 July 2018

Consultation on TPR powers

Further to its recent defined benefit (DB) pension schemes White Paper, the Government has now started a consultation on stronger powers for The Pensions Regulator (TPR).

Following the announcement, the Work and Pensions Committee pulled the DB White Paper consultation proposals together into in a pdf to make it more accessible.

Following its inquiry into the sale of BHS and in its subsequent work on DB pensions regulation, the Committee has called for “nuclear deterrent” level fines of up to 3 times the amount determined in a TPR issued Contribution Notice, to “focus boardroom minds” at the point at which decisions affecting the funding of pension schemes are taken. The Committee’s current DB pensions white paper inquiry will next take evidence on 18th July, from TPR.

Pensions tax reliefs to be ‘examined’

Baroness Buscombe recently revealed, in a speech in the House of Lords, that the government is set to take a close look at the current pension tax relief system. The Conservative peer said -

“I turn now to the net payment arrangements versus relief at source. Pensions tax relief is a matter for Her Majesty’s Treasury. The Government recognise the different impacts on pension contributions for workers earning below the personal allowance, but to date it has not been possible to identify any straightforward or proportionate means to align the effects of the net pay and relief at source mechanisms more closely for this population. However, alongside further work on the AE changes outlined in the review, the Government will examine the processes for payment of pensions tax relief for individuals to explore the current difference in treatment to ensure that we can make the most of any new opportunities that emerge, balancing simplicity, fairness and practicality while engaging with stakeholders to seek their views. It is important that employers are free to choose a scheme that best suits the needs of their businesses and rel="noopener noreferrer" workers."

IA calls for new partnership in pension provision

The Investment Association has published a paper on defined contribution (DC) pensions, “Putting Investment at the Heart of DC Pensions”, highlighting the critical importance of investment management, alongside the need to increase pension contributions, if today’s savers are to have a more secure and prosperous retirement.

Looking to a new partnership between pension schemes and the investment management industry, the IA’s paper sets out a range of measures and recommendations that will create a firm foundation for the future.

These include:

  • A clear objective for savers so they know what their pension scheme is aiming to deliver for them.
  • Further work to encourage greater engagement, particularly to achieve sufficient contribution rates.
  • Increasing opportunities for savers to invest in a more responsible and sustainable way.
  • Greater transparency of investment costs within pension products allowing savers to better assess ‘value for money’ in DC investment.
  • Measures to ensure that DC schemes can invest more easily in the full range of asset classes so that savers are not missing out on investment opportunities.

Central to the IA’s proposals is the idea that investment needs to have the same priority in all forms of pension - whether defined benefit (DB) or DC, and that every saver has the ability to access rel="noopener noreferrer" the full range of investment opportunities.

Pensions Institute paper on longevity-linked assets

A new asset class linked to longevity risk is considered in a discussion paper published by the Pensions Institute.

The discussion paper says that for the market to become global certain market requirements need to be satisfied, such as understanding the causal factors underlying longevity and the development of market indices and mortality forecasting models. The government has a role in contributing to the development of the market, as do pricing models. By addressing these issues, as well as understanding the needs of investors better, the asset class can become global, by attracting new groups of investors seeking returns that are uncorrelated with existing financial instruments.

PRAG publishes updated SORP

The Pensions Research Accountants Group (PRAG) has revised the accounting framework for pension schemes with the publication of the Pensions SORP (Statement of Recommended Practice) 2018 to bring guidance in line with the latest version of FRS 102

Revised Practice Note 15 includes an illustrative statement of trustees’ responsibilities about their key responsibilities in relation to the preparation of financial statements, including going concern considerations.

PRAG has also published an accompanying briefing note setting out the more significant rel="noopener noreferrer" amendments.

Copies of the Pensions SORP are available from

FCA publishes final report and consultation for Retirement Outcomes Review

The FCA has published the final findings of its Retirement Outcomes Review, which looks at how the retirement income market is evolving since the pension freedoms were introduced in April 2015. As part of this, the FCA sets out a package of proposed remedies to address the concerns identified.

These include: “wake-up” packs to be sent to customers aged 50 and then every five years thereafter; the introduction of investment pathways for customers at the point of entering drawdown; and that all consumers who have accessed their pension should receive information from their provider annually, whether or not they are currently drawing an income from their pot.

If firms fail to introduce investment pathways with appropriate charge levels then the FCA has not ruled out introducing a cap on drawdown charges.

Findings from the retirement outcomes review include :

  • there are weak competitive pressures and low levels of switching. Most consumers choose the 'path of least resistance', accepting drawdown from their current pension provider without shopping around
  • one in three consumers who have gone into drawdown recently are unaware of where their money was invested
  • some providers were ‘defaulting’ consumers into cash or cash-like assets, but holding cash is highly unlikely to be suited for someone planning to draw down their pot over a longer period.
  • consumers might pay too much in charges. FCA found that charges for non-advised consumers vary considerably from 0.4% to 1.6% between providers, and are, on average, higher than in accumulation (where in some cases they are capped at 0.75%)
  • drawdown charges can be complex, opaque and hard to compare
  • so far, FCA has not seen significant product innovation for mass-market consumers.

The Work & Pensions Committee has also published its comments on the review.

TPR updates Chair’s Statement checklist

An updated version of ‘A quick guide to the chair’s statement’ has been published by The Pensions Regulator (TPR). The updated guidance includes a checklist for trustees to use so they can be confident that they have addressed all areas sufficiently, including notes on what TPR expect. It also gives some examples rel="noopener noreferrer" of good practice for each requirement, as well as some common misunderstandings and omissions TPR has seen in the statements submitted so far.

CJEU rules that UK discriminated against transgender pensioner

The Court of Justice of the European Union has ruled that the UK discriminated against a transgender pensioner who was told that she could only access her State pension from the age of 60 if she annulled her marriage.

The woman, MB, had been unable to apply for a gender recognition certificate (GRC) as she refused to annul her marriage to her wife. UK law at the time only permitted marriage between a man and a woman. MB’s 2008 application for a UK State pension was refused as she did not hold a valid GRC. So, she could not be treated as a woman for the purposes of determining her statutory pensionable rel="noopener noreferrer" age.

The case will now return to the UK Supreme Court for a final ruling.

According to pension lawyers, the ruling could potentially have wider implications.

Heterosexual civil partnership ruling could affect pensions

In Steinfeld and Keidan, R (on the application of) v Secretary of State for International Development (in substitution for the Home Secretary and the Education Secretary), the Supreme Court ruled that restricting civil partnerships to same sex couples only is discriminatory. It found in favour of heterosexual couple Rebecca Steinfeld and Charles Keidan, who had sought a civil partnership based on their desire to enter into a legally-recognised relationship despite their “conscientious rel="noopener noreferrer" objection to marriage”.

If civil partnerships must be extended to heterosexual couples then the ruling could create new liabilities for pension schemes that pay out survivor benefits.


John W. Wilson LLB(Hons) FPMI ACII, Head of Research| Email:

Stephen Williams, Senior Research Consultant | Email: