Developments in Employee Benefits law and practice

17 September 2018

Legislation to clarify PPF compensation rules

The Department for Work and Pensions (DWP) has published its response to a consultation ended on 24 July 2018, which sought views on changes to the Pension Protection Fund (PPF) compensation rules to ensure that the PPF has the legal basis to administer the compensation regime as intended. In its response, the DWP said that, in the light of Hampshire v PPF, it will legislate so that benefits are not aggregated for the purposes of restricting the amount of compensation (the cap) paid to deferred and active members below normal pension age at the assessment date.

The original consultation, published on 3 July 2018, proposed changes to the Pension Protection Fund (Compensation) Regulations 2005, SI 2005/670, to remedy problems caused by a recent High Court judgment (Beaton) which resulted in the legislation being interpreted in a way that did not reflect PPF practice or the policy’s intent. The changes were proposed to ensure that the PPF has the legal basis to administer the compensation regime as intended.

However, to reflect the recent EU Court of Justice judgment in Hampshire v PPF, (2018) C-17/17, [2018] All ER (D) 08 (Sep), the government had to make a U-turn in its proposals and, rather than legislating to make it clear that a fixed transferred-in pension is attributable to pensionable service in the receiving scheme, it now intends to legislate so that benefits are not aggregated for the purposes of restricting the amount of compensation (the cap) paid to deferred and active members below normal pension age at the assessment date.

This means in practice that an individual's relevant fixed pension will be treated separately from their pensionable service within the scheme, and as such subject to two separate caps.

The final form of the regulations ensures that benefits are not aggregated, and amends the Compensation Regulation to clarify that the PPF can:

  • Pay survivor benefits to vulnerable groups such as widows or widowers and eligible dependent children
  • Revalue PPF compensation which is not yet in payment
  • Apply inflationary increases to compensation payments Include a relevant fixed pension in the application of the of the 90 per cent level of compensation (subject to the cap) for those already receiving their pension and who were below NPA at the assessment date.

Updated guidance on the pension scheme reconciliation service

HMRC have updated guidance on the Pension Scheme Reconciliation Service at the Guaranteed Minimum Pension (GMP) data section.

Check scheme details using the Scheme Reconciliation Service explains how pension scheme administrators can check if membership and GMP data matches HMRC’s records.

The Scheme Reconciliation Service provides a list of contracted-out periods and GMP data for members of defined benefit schemes who have left contracted-out employment to help pension scheme administrators reconcile their membership and GMP data against the records held by HMRC. The guidance has been updated at the GMP data section.

TPR want to improve performance of small DB schemes

Small defined benefit (DB) schemes are falling behind on improvements and standards while most DB savers belonging to larger schemes, according to research from The Pensions Regulator (TPR).

The report points to poor governance standards from trustees as the key factor in the poorer performances of smaller schemes, which leads to them not meeting the principles of TPR’s funding codes, particularly in managing risk.

TPR has confirmed that it will continue to take action to drive good governance and administration in all schemes, regardless of size.

TPR plans to increase its involvement with smaller schemes to assess their performance in:

  • governance
  • covenant
  • investment
  • funding

The TPR plans to provide clear, directive feedback to the trustees of small schemes, with penalties for schemes which do not act on the feedback.

Public service pension schemes and employer contributions

This House of Commons Library Briefing - Paper Public service pensions employers contributions -  analyses public services pension schemes which are unfunded and operate on a pay-to-go basis.

Latest AE data published by the Regulator

Latest data from The Pensions Regulator provides further confirmation of the increase in workplace pension participation following the introduction of auto-enrolment -

Latest AE data published by the Regulator

Response to consultation on trustee investment duties

DWP has published its response to a consultation alongside new regulations containing changes to the current investment disclosure regime.

The regulations include several changes to the way schemes currently prepare and revise their investment disclosure documents, including their SIP.

Before 1 October 2019, affected schemes will be subject to the following requirements:

  • Duty to take into account financially material considerations.
  • Stewardship obligations. Affected schemes will be required to state in their SIP their policy on stewardship, including on voting, engagement and monitoring.
  • Importance of non-financial matters. Affected pension schemes will be have the option of including a reference in their SIP as to the extent (if at all) to which non-financial matters are considered in the selection, retention and realisation of investments.

OPS Master Trusts Regulations 2018

These Regulations implement the new authorisation and supervisory regime for master trust pension schemes under the provisions of the Pension Schemes Act 2017.

A House of Commons library briefing considers the provisions to regulate master trusts.

Trustee succeeds in claim to pursue pension guarantee

In this case, Caribonum Pension Trustee Ltd (as trustee of the Caribonum Pension Scheme) v Pelikan Hardcopy Production AG, the High Court held that an attempt by the trustees of a pension scheme trustee to pursue the payment of a pension scheme (‘section 75’) debt was not an abuse of process.

The claimant trustee brought the case against a Swiss company that was part of a group which included a company that was a participating employer in the scheme. That company was in liquidation and owed over £4 million to the scheme.

The trustee and the defendant had entered into a deed of guarantee concerning the company’s liabilities under the scheme. The trustees brought a claim pursuant to the guarantee.

The Chancery Division held that the defendant had no real prospect of succeeding on its defence, which contended that the guarantee in question was limited to the extent of its freely disposable reserves. The court further held that an inability to enforce the judgment against the defendant did not render the claim an abuse of process, and that an absence of assets to satisfy a judgment was not a ground for not granting it.

Defined contribution trust-based pension schemes research

A new report from the Pensions Regulator summarises the findings from the 2018 quantitative survey among DC schemes.

The objectives of the research were:

  • To measure the extent to which DC schemes were meeting the key governance requirements, and to monitor any changes from the 2017 survey
  • To measure the extent to which schemes are meeting TPR’s expectations, as set out in the code
  • To assess recall and perceptions of the 21st Century Trustee communications, and to measure how schemes are performing on the themes covered by the campaign

The survey comprised quantitative interviews with 441 single-employer schemes and 24 relevant multi-employer schemes, commonly known as ‘master trusts.


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

Stephen Williams, Senior Research Consultant | Email: