Developments in Employee Benefits law and practice

11 January 2016

Week ending 10 Jan: Half a million ‘staging dates’ in 2016 | Retirement income market data: July – September 2015 and more

Half a million ‘staging dates’ in 2016

According to the Pensions Regulator, up to half a million small and micro employers must act this year to meet their new workplace pensions duties. All of these employers have received letters from the Regulator alerting them to when their automatic enrolment duties start (their ‘staging date’) and reminding them to act.

According to the Regulator’s research, most employers want to do the right thing by their staff but smaller employers are more likely to leave things to the last minute. As the Regulator deals with smaller employers, it is expected there will be more who, despite the message to prepare early, leave it too late or do not take action at all. Failing to prepare on time risks avoidable compliance action.

Employers should start planning by using the Regulator’s online duties checker which is part of a new online step-by-step guide. The checker tells employers specifically what duties apply to them and this means the Regulator can send them information suitable for their circumstances.

Not all employers will have staff who need to be put into a pension scheme but they will still have duties to tell staff about automatic enrolment and complete a declaration of compliance. Anyone who receives a letter from the Regulator but who does not employ any staff should still act by telling The Pensions Regulator. Failing to do this could trigger unnecessary compliance action.

The Regulator says that with hundreds of thousands of employers needing to meet their workplace pension duties, it makes sense to approach pension and software providers and business advisers in good time.

Administrator did not ‘harass’ member in recovering pension overpayment

In this determination (Belk, PO372), Mr Belk complained that the administrator of his pension plan, Mercer and the plan Trustees:

  • illegally reduced his monthly pension from the plan because they failed to provide him with any evidence of their calculations and also did not obtain his consent before doing so; and
  • unfairly sought recovery of overpaid pension payments totalling £1,416.

He also alleged that Mercer:

  • failed to arrange payment of one of his Additional Voluntary Contribution (AVC) funds on a timely basis and offer him compensation calculated on an equitable basis; and
  • improperly offered him financial advice in their letter of 2 November 2012.

In Mr Belk’s opinion, Mercer’s actions constituted illegal harassment as defined in the Employment Equality (Age) Regulations 2006.

In dismissing the complaint, the Ombudsman held that:

  • Mercers and the trustees were legally entitled to correct Mr Belk’s retirement benefits from the Plan and recover the pension overpayment given his circumstances;
  • it was not unreasonable for the Respondents to offer Mr Belk the opportunity (which he duly accepted) to obtain full details of how his revised lower pension payable from Plan had been calculated after the reduction was made;
  • Mr Belk had provided insufficient documentary evidence to prove that he could not repay the portion of the overpayment which Mercer legitimately proposed deducting;
  • Mr Belk had been offered adequate compensation for the maladministration, including £1,000 in recognition of the distress and inconvenience which he had suffered in dealing with this matter.

Amendments to pension scheme presumed to be valid unless proved otherwise

In this case, Alexander and others as trustees of the Scottish Solicitors Staff Pension Fund v Pattison & Sim and others, the Inner House of the Court of Session in Scotland dismissed an appeal by the partners of a legal firm in ongoing litigation concerning a claim for arrears of pension contributions allegedly due from the firm to the Scottish Solicitors Staff Pension Fund (‘the Fund’).

The partners of the firm denied liability for the pension contribution arrears, contending that the trustees were not entitled to bring their claim on the basis that amendments made to the Fund’s governing deed since 1980 were invalid. Until 1991, amendments had to be approved under a process requiring two-thirds majority approval of each constituency involved in the Fund at three general meetings. The trustees were unable to produce evidence showing full compliance with the process on each and every occasion an amendment was made.

Lord Drummond Young observed that the Latin maxim omnia praesumuntur rite esse acta -all things are presumed to have been done in due form - was relevant to transactions that took place a significant time ago. It was, therefore, for the partners to prove the amendment process had not been followed and they could not do so.

So, the various amendments had been properly effected.

This case could be relevant to ‘equalisation’ disputes where it is alleged that normal retirement ages were not properly equalised for men and women. However, it is only of persuasive authority in England and Wales.

Retirement income market data: July – September 2015

This report, just published by the FCA, covers the following topics:

  • choices made by consumers accessing their pensions;
  • guaranteed annuity rates – levels taken up and not taken up;
  • levels of pension withdrawals for customers making a partial withdrawal;
  • use of regulated advisers;
  • consumers’ stated use of Pension Wise;
  • whether consumers change providers when accessing their pensions.

Main findings are:

  • 178,990 pensions have been accessed by consumers from July to September 2015. This is a 13% drop from the 204,581 reported in data the FCA collected for April to June 2015.
  • 68% of these pensions were fully cashed out and 32% were used to take an income. 88% of full withdrawals involved pots of less than £30,000.
  • 68% of Guaranteed Annuity Rates (GARs) were not taken up. Of the GARs that were not taken up, 79% were in pots of less than £30,000 and 90% were in pots of less than £10,000.
  • 71% of customers making a partial withdrawal took less than 2% of their pot after tax free cash.
  • 58% of drawdown and 37% of annuity customers used a regulated adviser. Customers with larger pension pots were more likely to have taken regulated advice.
  • 58% of drawdown and 64% of annuity customers stayed with their existing pension provider.

Employer had duty of care to tell employee about impact of re-employment on protected pension age

In one of a number of related determinations, the Pensions Ombudsman has held that a Police and Crime Commissioner had a duty of care, as employer, to provide a police officer with information about the tax penalties on his retirement benefits in the event of being re-employed within a month of becoming entitled to his retirement benefits under the Police Pension Scheme.

The police officer left service and took his benefits in June 2011, but was re-employed in largely the same role less than a month later. This resulted in him losing his protected pension age and his past and future pension payments up to age 55 becoming ‘unauthorised’. The officer was not told about the consequences.

The Ombudsman directed the Commissioner to reimburse the police officer for tax charges arising from the loss of the protected pension age.

Contact:

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

Julian Rowe, Head of Technical | Email: julian_rowe@jltgroup.com