2018 has been an eventful year in the world of pensions. We have picked out 12 highlights from the year below and considered how these will impact on pension schemes and their employers as we look forward to 2019:
- The year started off with the High Court ruling that BT did not have the power to determine that the retail price index (RPI) had become inappropriate and could be replaced by the consumer price index (CPI) for the purposes of calculating pension increases. This decision was later upheld by the Court of Appeal. The case largely turned on the specific wording of BT’s scheme rules but adds to an increasing volume of case law and will be a useful reference point for trustees and companies considering this issue.
- In March the Government published its long awaited White Paper. Themes included creating a stronger Pensions Regulator (the Regulator) and improving the way the system works through changes to scheme funding and consolidation. Since the publication of the White Paper we have seen the Regulator rebrand and become more visible and proactive in its regulation.
- The Department for Work and Pensions (DWP) published a consultation on the Regulator’s powers in June. The consultation set out how the DWP will advance some of the initial proposals put forward in the White Paper. The three areas of focus were corporate oversight, the sanctions system and the power of the Regulator to issue contribution notices and financial support directions (FSDs). This consultation closed in August and further consultation on a revised code of practice for funding defined benefits is expected in 2019.
- In April, interestingly the High Court held that recovery of overpayments by way of recoupment is not subject to a six year limitation period. The outcome of this case is being appealed and is expected to be heard in April 2019.
- Following a referral by the Court of Appeal to the European Court of Justice (ECJ), the Advocate General gave her opinion in May that every individual in the Pension Protection Fund (PPF) must receive at least 50% of their accrued benefits. This opinion was later followed by the ECJ and the PPF is currently taking steps to establish how to implement this for existing members.
- Also in May, the Upper Tribunal issued its long awaited judgment in the Box Clever case and confirmed that the Regulator can take into account events which occurred prior to 2005 when considering whether to issue FSDs.
- At the end of May we saw the introduction of new data protection legislation, which required trustees and companies to consider the way that they were managing data within their pension schemes.
- The Court of Appeal ruled in favour of British Airways in July therefore reversing the High Court’s previous judgment in respect of the Airways Pension Scheme Trustees’ decision to award a discretionary increase which would cost the employer approximately £12 million.
- The Competition and Markets Authority published a provisional report into the investment consultancy and fiduciary management markets in July which proposed a number of changes to those markets in order to address the concerns identified. The final report was published this month and changes are expected to be implemented in 2019.
- If some of the issues above have been described as “long awaited”, that was nothing compared to the wait for a legal ruling on the matter of GMP equalisation. The High Court finally ruled in November that pension schemes must equalise pension scheme benefits to address the inequality caused by the provision of unequal GMPs for men and women.
- Also in November the Supreme Court rejected Barnardo’s appeal and upheld the lower courts’ decisions that the scheme’s rules did not permit the trustees to switch from RPI to CPI unless RPI ceased to be an officially published index. As with BT, this is a case which turns on the wording of the scheme’s rules but creates another reference point for companies and trustees who are still grappling with this issue.
- This month, the Supreme Court brought a 13 year legal battle to an end and ruled that the entire period of a part time judge’s service should be used to calculate their pension entitlement and not just the period from 7 April 2000 (which was the deadline for transposing the EU law that related to part-time service into UK law).
This blog post was written by Patricia Bailey. For further information, please contact:
Michael Collins, partner, Pensions
T: 0121 234 0236