Pensions - Gowling Wlg

Key points Ceasing to employ active members in a defined benefit pension scheme at a time when another employer continues to employ active members into that scheme can trigger a potentially crippling debt. There are various mechanisms which can be deployed to avoid the effects of this lawfully. These should be considered before the debt is triggered.

Key points Most defined benefit pension schemes are funded through a combination of employer contributions and investment returns, although the requirement for member contributions is increasing Rules exist that seek to ensure that pension schemes will be able to afford to pay member benefits when they fall due Pension schemes have an ongoing "statutory funding objective" to have sufficient and appropriate assets to cover their technical provisions (i.e. the actuarially-assessed value of each scheme's liabilities) Pension schemes must undergo an actuarial valuation every three years in accordance with section 224 of the Pensions Act 2004 Trustees must put in place various documents as part of an actuarial valuation, including a statement of funding principles (section 223 of the Pensions Act 2004), a recovery plan (section 226 of the Pensions Act 2004) and a schedule of contributions (section 227 of the Pensions Act 2004)

Key Points The Pensions Regulator's (TPR) anti-avoidance powers include contribution notices and financial support directions. They can be used if employers fail to support a scheme, cause material detriment to the chances of a person receiving benefits or the employer is insufficiently resourced or is a service company. Advance clearance is possible for specific transactions. TPR regularly publishes reports on the considerations it gives to the exercise of its powers and functions.

Key points Employers and trustees have a statutory duty to notify the Pensions Regulator if certain prescribed events occur in an occupational pension scheme. Some prescribed events do not have to be notified if certain conditions are met e.g. if the scheme is fully funded on the PPF basis. If an event occurs it must be notified in writing to the Pensions Regulator as soon as reasonably practicable. Civil penalties can be imposed for non-compliance.

Key Points Trustees, managers, administrators, participating employers, professional advisers and those otherwise involved in advising trustees are under a duty to report breaches of the law. It is essential that companies put in place procedures to comply with the Pension Regulator's Code of Practice on reporting breaches of the law. Trustees must bear in mind the need to act within the powers and responsibilities afforded to them in the trust deed and rules. When deciding whether to report, two points arise: (a) has there been a breach of law and (b) is it of material significance to The Pensions Regulator? It is important to have a reporting system in place and to be aware that one party's report does not automatically remove the duty from another party to report the same breach. The Pensions Regulator has the power to impose fines and report advisors to their professional governing bodies if they fail to report materially significant breaches.

Key Points TPR has statutory objectives which include protecting pension scheme members' benefits TPR has a broad range of investigative, remedial and anti-avoidance statutory powers TPR's stated approach is to educate, enable and enforce TPR regularly publishes reports on the considerations given by it to the exercise of its powers and functions

Key Points Anyone who employs workers in the UK will have to comply with new employer duties with effect from their 'staging date'; An employer's 'staging date' is set out in legislation and falls between 1 October 2012 and 1 February 2018 depending on how many people work for the employer; Employer duties are to: assess and categorise their workers; automatically enrol any workers who meet the criteria to be 'eligible jobholders'; and are not members of a 'qualifying scheme'           into an 'automatic enrolment scheme'; issue communications to all workers including certain prescribed information; process opt-in and opt-out requests; pay contributions for jobholders in pension savings in line with statutory minima; and provide The Pensions Regulator with a confirmation of how they have complied with their duties.

The pensions industry has one year to prepare for new regulations coming its way. Europe's new data protection legal framework is set out in the General Data Protection Regulation (GDPR) which will come into force in all EU Member States on 25 May 2018, including the UK. While the changes are not radically different to the current legal requirements, there are important developments that the pensions industry needs to be aware of ahead of May 2018.

Every quarter, the Gowling WLG pensions team prepare a legal update covering the most relevant issues and developments for trustees and employers. The update covers new legislation, regulatory changes, pensions taxation and administration, scheme governance, investment and funding and pension cases and Ombudsman determinations.

Key points Prior to 6 April 2016, an occupational pension scheme could contract out of the Additional State Pension on a defined benefit (DB) basis. Prior to 6 April 2012, an occupational or a personal pension scheme could contract out of the Additional State Pension on a defined contribution (DC) basis. In a contracted-out scheme, the member and his employer paid a lower rate of National Insurance contributions. The member receives an amount of pension from their contracted-out scheme which is at least as good as the Additional State Pension given up.

Key points Pensions in the UK are provided in a number of different ways: state pensions versus private pensions; occupational versus personal pensions; and trust-based versus contract-based. Employers provide pensions to fulfil legal obligations, because they are a tax-efficient benefit and to retain and attract employees.