It’s that time of year when we spend time with friends and family, whom we’ve managed to avoid since last Christmas by relying on the excuse of being so very busy, we panic when the shops shut for 24 hours on Christmas Day and we battle with the crowds on Boxing Day to return the bright orange jumper from Grandma, the spiralizer and the selfie stick.
Before the joys of the season officially begin (we don’t consider the fact that mince pies have been on sale since August as a guide to when Christmas begins), why don’t you sit down with Talking Pensions, open a bottle of Baileys (other brands are available, please drink responsibly) and consider the pensions landscape at the end of 2017 with us.
Talking Pensions has reported on many developments in pensions this year, such as the landmark ruling which brought equality of pension provision a step nearer, the Regulator’s drive to improve pension scheme governance, the forthcoming changes to data protection law, and Guaranteed Minimum Pension (GMP) equalisation – that old chestnut (roasting – yes I think we’ve done that one already). We’ve picked out a few highlights for you. With much written by the Talking Pensions little helpers on such subjects in 2017, what can we expect in 2018?
Security and sustainability
Following the collapse of BHS and the subsequent report issued by the Work and Pensions, and Business, Innovation and Skills Committees, which proposed a number of changes to improve protection for pension scheme members, the Department of Work and Pensions published a green paper on the security and sustainability of defined benefit (DB) pension schemes. We covered its contents here. The Green Paper raised questions in four key areas:
- Funding and investment;
- Employer contributions and affordability;
- Member protection; and
- Consolidation of pension schemes.
- A white paper due next year will set out proposals for reform in the above areas and potentially also propose improvements to the Pensions Regulator’s powers.
Death benefit equality
The Supreme Court[1] overturned a decision made by the Court of Appeal and ruled that surviving same-sex spouses should have their pensions calculated on the same basis as a surviving spouse of the opposite sex. The Court held that calculating the pension based only on pensionable service completed after 5 December 2005 (the date on which the Civil Partnership Act came into force), and not on the whole of a member’s pensionable service, was incompatible with EU law. Trustees should now be disregarding any such restrictions in their scheme’s rules.
Clarity on DC transaction costs
In October the DWP published a consultation on improving the disclosure of costs, charges and investments in Defined Contribution (DC) occupational pension schemes. We agree that transparency has to be improved for DC scheme members. We posted our thoughts on the consultation.
Data protection
As 2017 draws to a close, data protection compliance is at the top of the trustee agenda. The General Data Protection Regulation comes into force in the UK on 25 May 2018, bringing with it the prospect of increased fines for non-compliance. Trustees should currently be carrying out a data mapping process and considering the basis on which they hold personal data. See our posts from July and December for more information and a GDPR Guide for Trustees.
Where will 2018 take us?
In 2017 we also published posts looking at new anti-money laundering obligations and DB investment guidance.
We reviewed the Regulator’s position on scheme governance and trusteeship. We expect both of these programmes to be further developed in the coming year, and we await progress following the consultation on the transfer of contracted-out benefits.
As we noted above, a white paper on the future of DB pension schemes is expected.
The Lloyds Trade Union case is due to be heard in early 2018. Lloyds Trade Union is seeking a ruling from the High Court on whether there is an obligation on the trustee of three pension schemes to adjust non-GMP benefits payable under those schemes, so that the total benefits received by male and female members are equal in value. We reviewed this case in June. The decision in this case may provide clarity to trustees on whether to proceed with equalising for the effect of GMPs on male and female members of their schemes. We can but hope for clarity from some source on GMP equalisation and whether it should be implemented.
There are few certainties in life. However we venture to suggest that 2018 will bring with it two absolutes. We will continue to see a great deal of activity as pension schemes prepare for the new data protection regime, and Talking Pensions will continue to provide you with comment on the pensions stories of the day…and perhaps the occasional really poor seasonal joke.
[1] Walker v Innospec Ltd and others [2017] UKSC 47