This update takes a look at five key pension issues for employers to focus on this quarter
Pensions Regulator's new tougher approach following BHS
The Pensions Regulator is taking a much tougher approach towards employers on scheme funding after being criticised in the wake of the BHS collapse for being reluctant to exercise its powers. Employers negotiating with trustees on pension contribution levels should be alert to the Regulator's more interventionist approach. Even actions which are not obviously pensions-related such as re-financings or dividend payments carry a risk of regulatory action if the Regulator thinks the pension scheme's position has been worsened as a result. Click here to see our key recommendations to avoid ending up at the sharp end of the Regulator's powers!
RPI or CPI: Time to revisit pension increases?
The statutory minimum basis for pension increases changed from RPI to CPI from 1 January 2011, so why re-visit now? The answer is that how the change to legislation impacted individual schemes depended on the exact wording of their rules, and since 2011 there have been a number of court cases clarifying legal grey areas. So if your scheme rules were in the "grey area" category back in 2011 and you ruled out a change as too risky, the legal position may have evolved since. Our guide looks at the issues for employers to consider.
Can a pension change be challenged because it's unreasonable?
Can a change to pension arrangements be challenged on the grounds that it's unreasonable despite complying with the letter of the law? The Court of Appeal has considered this issue in two recent cases. The good news for employers is that the Court's judgments set the bar for such a challenge pretty high, with both cases showing that pension changes, if undertaken carefully, can withstand challenge and provide a valid means of controlling costs. For details of the courts' approach to such cases, see our update.
Life assurance: when was your last review?
Changes to the tax regime in recent years mean that existing arrangements may no longer be fit for purpose, particularly for senior employees. Experience shows that this is an area where the paper work is often neglected, risking uninsured liabilities for the employer and reputational risk if issues only come to light following the death of an employee. Take a look at our guide to the key issues for employers to consider.
Trustee discretions: wider than you think?
The trust deeds and rules that govern pension schemes allocate different powers between the schemes’ trustees and employers. When we discuss “balance of power” issues with employers, we often hear the belief expressed that “trustees must act reasonably mustn’t they?” It is true that they mustn’t act perversely, but that is an extremely difficult thing to prove in practice. Our update on the recent court case regarding the British Airways pension scheme illustrates the need for employers to have a healthy respect for trustee powers.