Pensions & GDPR – the 12 month countdown begins!

The General Data Protection Regulation (GDPR) comes into force on 25 May 2018.  Before that date, trustees of UK occupational pension plans will need to undertake some preparatory work, including:

  • Creating records of all personal data processing activities (or confirming delegation to plan administrators and obtaining confirmation that they will do this) and ensuring administration agreements reflect who is doing what,
  • Reviewing and amending agreements with other third parties,
  • If data is transferred outside of the EEA, putting in place international data transfer mechanisms,
  • Reviewing data security measures (see below),
  • Putting in place procedures for new individual rights,
  • Reviewing and amending privacy notices,
  • Assessing whether there is any ‘high risk’ use of personal data and
  • Formally adopting and rolling out new policies and procedures.

There are some obvious and less obvious pitfalls to consider here.  For example, if a trustee is on holiday outside of the EEA and picks up emails containing personal data whilst away, that will constitute transferring data outside of the EEA.

The recent global cyber attack has thrown into sharp focus the need for trustees to ensure the robustness of cyber security measures put in place by their data processors. As Investment & Pensions Europe report, there has also been a recent instance of a Belgian pension fund being subject to a cyber attack – Ogeo hack.

Where trustees access emails and documents containing personal data through their own home computers and/or personal mobile devices, there are some key issues about how this is managed:

  • Do all trustees use up to date malware protection?
  • Do the trustees have rules around the encryption of personal data?
  • Do the trustees have a formal policy covering cyber security risks or do they document a policy in a business continuity plan or risk register?
  • Is there a nominated trustee, who is specifically responsible for cyber security?
  • Has the trustee board had any training on cyber security in the past 12 months?
  • Do service level agreements require the trustees’ providers to adhere to specific cyber security standards?
  • Do the trustees have a cyber security incident plan in place?
  • Do the trustees have insurance in place that would cover a cyber security breach or attack?
  • Do the trustees use a segregated wireless network with firewalls?

If you would like any help with preparing for the GDPR, or with your cyber security policies, procedures or arrangements generally please get in touch with your usual Squire Patton Boggs contact.

French social contribution refund for unvested free shares?

In Société Orange (decision QPC 28-4-2017 n°2017-627/628), the French Constitutional Council has ruled that the refusal of the tax authorities to reimburse an employer company’s compulsory social security contributions, made in respect of the grant of conditional bonus (or free) shares where the conditions are not subsequently met (such that the shares never vest), was contrary to the principle of equality as enshrined in Article 13 of the Déclaration des droits de l’homme et du citoyen of 1789.

At the time, the relevant regulations (Article L 137-13 of the French Social Security Code (CSS)) required an employer to make social security contributions on the allocation of ‘free shares’. The contribution was fixed at 10% and due the month following the date of the decision to award the shares. The second chamber of the Cour de Cassation had previously ruled that the employer could not be reimbursed for that contribution, even if the ‘free shares’ never vested.

The company appealed on the basis that linking the employer’s liability to the decision to award the shares (subject to future conditions) infringed the principle of equality when compared to contributions made in respect of remuneration in the form of unconditional bonus shares. The Constitutional Council rejected that argument, confirming that the provisions in the CSS requiring payment of the employer’s contributions before the assignment of the free shares were constitutional. In essence, the CSS did not establish any difference in treatment between the issue of unconditional free shares and conditional shares, merely by reference to the different taxable event dates.

However, the Constitutional Council did identify that the CSS did not prevent the reimbursement of an employer’s contributions in respect of conditional bonus shares where the conditions were subsequently not met and the shares did not therefore vest. In such cases, there was a clear inequality in treatment between, on the one hand, employer contributions made in respect of employees being remunerated by the allocation of bonus shares and, on the other, employer contributions made in respect of employee remuneration that does not ultimately get paid (where the shares do not vest) because certain conditions are not met. In the second scenario, the Council has ruled that the the contributions should be reimbursed to the employer company.

It should be noted, however, that the decision only affects ‘free shares’ granted after 16 October 2007 but before 8 August 2015. This is because the CSS was amended in August 2015 by the so-called ‘Macron law’ which fixed the problem at the heart of the dispute in this case. From that date, employers’ contributions are only due if the employees actually acquire the free shares and are assessed by reference to their market value at vesting. If, therefore, vesting is conditional, the contributions will not be due if the conditions are not met.

The case will be of keen interest to any French employer company that granted, during the relevant period, conditional bonus (or free) shares to incentivise their employees where the conditions were not subsequently met and the shares did not actually vest. Such companies may, if they act quickly enough, be eligible to claim reimbursement of the social security contributions they have made in respect of such grants.

Election 2017: May still right (and a little bit left) on track for victory in June

The Conservative manifesto, ‘Forward, Together’, unveiled late last week by Theresa May, was notable rather less for reiterating commitments to traditional, small government, Conservative principles of ‘low tax’ and ‘better regulation’ and rather more for its embrace of social inclusion, identifying a “need [for] a partnership between the individual and the wider nation, between private sector and public service, and the strong leadership only government can provide”.

Unsurprisingly, perhaps, most of the attention has focused on the proposals to implement “the first ever proper plan to pay for – and provide – social care”, so much so that Mrs May was today forced into a policy u-turn, stepping back from a firm commitment to implement her plan and instead merely promising to consult on the issue.

By contrast, relatively little has been said about the Conservative party’s plans to continue to tinker with the rules regulating corporate governance and employment taxes.

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Election 2017: Labour to raise income tax to 67.5%

Alongside the almost complete reversal of recent cuts in the main rate of corporation tax (returning it to 26% by 2020-21 – a rate not seen since 2011 or, rather, the time of the last Labour government), the proposal to introduce a so-called ‘Robin Hood’ tax on financial derivatives (a proposal mired by its own complexity in Europe and described in the past by the Labour Mayor of London, Sadiq Khan, as “madness”), and promises to explore new revenue raising options (such as a possible tax on land values), it is the proposals in the Labour Party Manifesto 2017 for income and employment taxes that are most eye-wateringcatching.

Income tax will not, Messrs Corbyn and McDonnell promise, rise for 95% of taxpayers. In addition, there will be no rise in personal National Insurance Contributions (NICs). So, in England and Wales at least, it will be the top 5% of taxpaying adults (i.e. the roughly 1.5m individuals who already contribute something approaching almost half of the current UK’s income tax takings) who will be asked to ‘contribute a little more’. In the main, that contribution will come from dropping the threshold for the additional rate of income tax (45%) from £150,000 to £80,000 while those with earnings over (a very precise) £123,000 paying tax at a [re-introduced] 50% rate.

These provisions alone will (it is hoped at least, assuming a certain degree of stability in any behavioural reaction) raise some £6.4bn per year by 2021-22. In addition, employer’s paying ‘excessive’ salaries will face the ‘Excessive Pay Levy’ (or, if you prefer, ‘Fat Cat Tax’), initially set at 2.5% of (as yet undefined) ‘total compensation’ in excess of £330,000 but rising to 5% of ‘total compensation’ over £500,000, and all of which will add another £1.3bn to the Treasury’s coffers.

Such proposals have, perhaps predictably (and/or understandably), set alarm bells ringing in business circles, already concerned by the uncertainty caused by Brexit and desperately desiring stability in the tax system in a fluid economic environment, because of the possible adverse impact they might have on the ability of UK firms to attract and retain talent.

But, from a pure tax policy perspective, the problems run even deeper.

On the one hand, the reaction of the highest earners is unclear but it is conceivable that directly increasing the headline rates of tax on those best placed to plan and structure around, or simply move out of, the reach of the increased charges, could prove to be counter-productive. This makes Labour’s calculations unstable, could result in the need for additional anti-tax-avoidance measures (and so more complexity in the UK’s tax code) and leave a Labour government disappointed by the tax revenue it actually collects.

On the other, the Labour Party have missed a golden opportunity to address one of the UK tax system’s most bizarre features: the arbitrary 60% effective rate (the highest rate borne by any group of earners in the UK) levied on those earning between £100,000 and, Labour’s specifically chosen, £123,000 figure which is caused by the manner in which the personal allowance is withdrawn. By leaving the mechanism for withdrawing the personal allowance in place, Labour’s policy would not only see the effective rate of income tax between £100,000 and £123,000 actually rise to a massive 67.5% but also, perhaps more fundamentally, entrench an element of illogical income tax unfairness… an open-goal, astonishing missed when included as part of a Manifesto apparently built on the principle of fairness in the interests of the many and not the few.

If Labour had sought establish a highest marginal income tax rate of 50% while abolishing the current Government’s effective 60% top rate they just might have won a few more friends.

Pension funds to benefit from further three year mandatory clearing exemption

Last week (4 May 2017), the European Commission published a legislative proposal to amend various provisions of the European Market Infrastructure Regulation (Regulation 648/2012) (EMIR).

The proposal was adopted following a general report on EMIR published by the Commission in November 2016. Although the report indicated that “no fundamental change should be made to the nature of the core requirements of EMIR”, there was the possibility to “eliminate disproportionate costs and burdens on certain derivatives counterparties”. Among other things, the proposal extends the transitional clearing exemption available to Pension Scheme Arrangements (PSAs), previously due to expire in August 2018, for a further three years on the grounds that no viable technical clearing solution for the transfer of non-cash collateral as variation margins currently exists. This is because Central Counterparties (CCPs) tend to only accept cash from their clients to meet variation margin calls, whereas PSAs typically limit their cash positions in order to yield higher returns for their policy holders. As a result, PSAs have to convert part of their assets into cash in order to centrally clear. This poses structural issues, results in significant additional costs and negatively impacts the retirement income of pensioners.

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We’ll CJEU in Court…or not!

The Upper Tribunal has rejected an application by the trustee of the British Coal Staff Superannuation Scheme for an expedited referral of its case to the Court of Justice of the European Union (“CJEU”). The Upper Tribunal decided that the unprecedented circumstances arising from the triggering of Article 50 did not alter its established test, or override its discretionary powers, in relation to making a reference to CJEU; and the trustee’s case had not met those requirements.

The trustee had appealed an HMRC decision concerning withholding tax and applied for its case to be referred to CJEU before being heard in full by the Upper Tribunal. Without an expedited referral, the trustee argued, the length of the judicial process could deprive the trustee of its opportunity to seek CJEU’s assistance before the end of the Brexit negotiations. The Upper Tribunal decided that it was not prepared to assume that “the arrangements that the Government will make for resolving disputes about the interpretation and application of EU law that are pending at the date of UK’s exit will be so unsatisfactory that the Tribunal should change its usual practice”.

The Upper Tribunal did, however, call upon the UK Government to make clear what its proposals will be, commenting that a solution “will have to be implemented because there are likely to be very many people in the same position as the Trustee may be on the date of exit”. Subsequently, the UK Government’s White Paper on the Great Repeal Bill has confirmed that “any question as to the meaning of EU-derived law will be determined in the UK courts by reference to the CJEU’s case law as it exists on the day we leave the EU.” Whether, and how, further UK-derived points of law might become CJEU case law before that day remains to be seen.

Will the new money laundering regulations inspire pension plan spring cleaning?

New regulations, coming into force in June 2017, will introduce stricter EU anti-money laundering requirements into the UK and seem likely apply to pension plans. The potential criminal penalties for breach of the regulations are likely to bring this to the forefront of people’s minds.

Will the new regulations apply to pension plan trustees? 

Probably!

The draft regulations (and response to an earlier consultation, which took place last year) are interesting because, as currently drafted, occupational pension plans will be caught by some elements of the new regulations. Express trusts (including occupational pension plans) will be required to

  • keep accurate records of all ‘beneficial owners’ of the trust (for pension plans this will mean the trustees, employers, anyone else who exercises control and the beneficiaries) and
  • provide those records to HMRC where the trust has incurred a liability to pay certain taxes (including income tax on dividends).

Respondents to the consultation queried whether HMRC might exclude certain types of express trust from the new requirements. HMRC has stated that as the Fourth Money Laundering Directive includes all forms of express trust, so must the new regulations.

Do pension plan trustees need to take any action? 

Most Likely!

The amount of work involved for trustees and administrators will very much depend upon whether HMRC modifies the definition of a ‘beneficiary’ for pension plans. At present, the regulations as drafted would require trustees to keep accurate data on trustees, employers, other persons who exercise control over the plan and all beneficiaries who can be identified – e.g.  active members, persons in receipt of pension, deferred members. Where a trust has a class of beneficiaries, not all of whom have been determined (for example potential recipients of survivor’s benefits), then trustees will only need to maintain a description of the class of beneficiaries.

Trustees of most plans will also be required to provide information about the pension plan to HMRC, along with all of the data required to be maintained in respect of ‘beneficial owners’. We expect that HMRC might design a form for completion by trustees.

Whilst the new regulations seem likely to cause pension plan trustees administrative headaches, this might not be the case if their implementation follows the course of the 2007 Money Laundering Regulations. When the 2007 regulations were first issued there was confusion around the extent to which pension plan trustees would be affected. In the end, and after the 2007 regulations came into force, HMRC issued guidance stating that occupational pension plans were considered to be low risk and pension plan trustees would not be obliged to register with HMRC.

It’s possible, therefore, that HMRC might modify (through guidance) the effect of the new regulations on pension plans.  Don’t hold your breath, however. HMRC has already stated that it won’t exclude any form of express trust from the requirements.   Additionally, there has been no indication from HMRC so far that the definition of ‘beneficiary’ might be modified for pension plans. Indeed, whilst an occupational pension plan is considered to be low risk, HMRC has said that it does intend using the data collected for other purposes, for example for ensuring early on that the correct amount of tax is paid when there is a payment from a trust to an individual.

What data will trustees need to record?

Trustees will have to keep records that can also be made available to law enforcement agencies and the UK Financial Intelligence Unit. The data to be recorded includes name, address, date of birth, NI number or unique taxpayer reference of all ‘beneficial owners’ and passport details for non-UK resident beneficial owners. Whilst most plans will keep the data required as a matter of course, if the definition of ‘beneficiary’ is not modified for pension plans, trustees will need to make sure that their data is regularly cleansed and is accurate. TPR has been emphasising the importance of accurate data for several years now, so hopefully most trustees will be on top of this. Unlike the penalties for failing to keep accurate records under the TPR regime, however, failure to keep accurate records under the new regulations will be a criminal offence, which could result in a fine and/or up to 2 years’ imprisonment for trustees.

What other impact will there be for trustees?

Under the current money laundering regime, providers who are required to carry out anti-money laundering checks on the trustees of an occupational pension plan (usually when they are first engaged to act) can undertake ‘simplified’ due diligence.  Under the new regulations, service providers would still be able to undertake simplified due diligence but would be required to consider whether it is appropriate. Those being cautious might require additional information about the trust from trustees, including member data records. Whilst we expect most providers will conclude that simplified due diligence would still be appropriate, this is something for trustees to bear in mind (along with the potential data protection issues surrounding the supply of member data to the service provider).

Given the potential for criminal sanctions, trustees may also wish to update their risk registers accordingly.

By what date must trustees be compliant?

The new regulations will apply from 26 June 2017, so trustees will need to be comfortable with the quality of member data records by that date. Additionally, trustees will have to provide information and data to HMRC before 6 April 2018 (or the end of the tax year in which they first become liable to pay any income tax, CGT, inheritance tax, stamp duty land tax or stamp duty reserve tax). This constitutes an ongoing reporting requirement – any changes in a subsequent tax year will need to be notified to HMRC.

What are the practical consequences for trustees?

Whilst nothing is certain until the final form of the new regulations and HMRC guidance are available, it is likely that trustees will have some form of record keeping and reporting obligations under the new regulations. Most trustees are likely to want to instruct their plan administrators to carry out these compliance tasks. Where the work involved increases risk or responsibility for plan administrators there is likely be a knock on effect on administration costs and/or a need to renegotiate administration agreements. A review of any administration agreement could be carried out as part of a review and update in anticipation of implementation of the General Data Protection Regulation. As ever, legal advice is always advisable when service provider agreements are updated.

If you have any questions or need support on this issue, please contact your usual Squire Patton Boggs pension team contact.

Oh Mr Regulator, what big teeth you have got!

“All the better to eat you with, my dear.” And so our precautionary tale begins.

Chapter 1 – Lost in the woods

Once upon a time the Pensions Act 2004 (the Act) was introduced and it gave a variety of enforcement powers to the newly formed Pensions Regulator (TPR). For a time at least, employers and trustees alike were wary of the stick attached to non-compliance, wondering how and when TPR would strike. As the years passed, however, some began to believe that, possibly due to a lack of resources, TPR was unlikely to investigate or penalise many examples of bad behaviour. The threat of being dragged down to Brighton to explain oneself no longer led to the immediate opening of a cheque book – the assumption being that TPR would seek to “educate” the miscreant rather than take enforcement action.

As with all good fairy tales, the baddies could not prosper forever and eventually, something changed. TPR began to fight back.

Chapter 2 – Who’s afraid?

In April 2016, TPR made clear its plans to raise its profile. It began to issue fines to trustees who failed to file their scheme returns on time with a view to clamping down on non-compliance to offer greater protection for members. Following the BHS pension scheme debacle, in respect of which TPR was heavily criticised in the press, it is now appealing for extra powers to promote greater scrutiny to protect members of pension schemes. And earlier this month, to really scare everyone, it issued two press releases on consecutive days about the first criminal convictions it had obtained for failures to comply with the terms of notices requiring information/documentation to be provided to TPR which was relevant in the exercise of its functions.

TPR has the power, under section 72 of the Act, to issue a written notice requiring a trustee, manager, employer, professional adviser or any other person who holds, or is likely to hold, information relevant to the exercise of its functions to produce a document or provide information within a specified time frame. It is a criminal offence under section 77 of the Act to fail to comply with such a notice without reasonable excuse. There is an exception to the requirement to produce documents or information in relation to what are known under section 311 of the Act as “protected items”, essentially material to which legal privilege attaches.

Anecdotally, TPR seems to have been upping the ante in terms of regulatory investigations in recent months and is using its section 72 powers more freely in circumstances where voluntary co-operation would previously have been sought. This month TPR announced that it has now prosecuted a firm of solicitors (and its managing partner) and the head of a charity for failures to comply with section 72 notices. These announcements send a clear message to not only potential targets of regulatory action but also to professional advisers and all other potential recipients of section 72 notices that the obligations under the notices are to be taken seriously and dealt with accordingly.

Chapter 3 – Beware! It bites!

The first prosecution was against a firm of solicitors and its managing partner, who pleaded guilty to failing to provide the requested documents without a reasonable excuse. TPR was investigating a pension scam and had requested documents from the solicitor even though neither the solicitor nor the firm were connected with the investigation, nor had either done anything wrong. The firm provided a variety of excuses in relation to the delay in providing documents, which were eventually only obtained 9 months later after the issue of a search warrant. The court noted a lack of corporate governance at the firm and TPR made it clear that disorganisation was not an excuse not to comply and would not be tolerated. The firm was ordered to pay a £2,700 fine (plus £2,500 costs) and the managing partner was fined £4,000 (plus £7,500 costs) and both were ordered to pay a victim surcharge of £120 each.

This case serves as a stark reminder to professional advisers that, even when they aren’t under investigation themselves, they may still be requested to assist TPR and should comply without delay. Not only can failure to provide such information result in an unlimited fine, those involved can suffer serious reputational damage from being successfully prosecuted for non-compliance with the law. In addition, advisers could also face further action from their professional body. It is hard to think of a reason why an adviser would want to risk their whole livelihood in this way but equally neither negligence nor incompetence will serve as an excuse.

The second prosecution was against Mr M, the Chief Executive of a Hampshire-based charity for the disabled. Mr M, a former trustee of the pension fund, refused to comply with a request for documents for over 18 months. He claimed that, as they contained information about third parties, it would be a breach of French privacy law to hand over certain documents. He also refused to hand over bank statements as he (wrongly) believed they were covered by legal privilege and subsequently refused to provide them on the basis that they would incriminate him. As such, Mr M pleaded not guilty to an offence. Hearing evidence on French law, the court found that Mr M had no reasonable excuse not to provide TPR with the documents and that they were not covered by either French privacy law or legal privilege. Similarly, a failure to provide documents on the grounds of self-incrimination was also not an excuse. Mr M was ordered to pay a £2,500 fine (plus £4,000 costs and a £120 victim surcharge) and it has been reported that his conviction has been referred to the Charity Commission.

In a press release on Friday, TPR confirmed that intervening more frequently and acting quicker are amongst its goals for the next three years – so we may anticipate further prosecutions of this type

Chapter 4 – Seeking a happy ending

For anyone seeking to come up with a “reasonable excuse” for a failure to comply with a section 72 notice, these cases highlight the sort of excuses that will not suffice. To the extent that there is any doubt about the scope of the notice, including whether or not a document falls within the categories requested or whether the privilege exception applies, then the safest course of action would surely be to apply to the court to get that clarified (as happened in Bloom v TPR) rather than risk prosecution and the further damage that that would incur. After all, we all want to live happily ever after.

Budget resolutions and the UK general election: what does it mean for pensions?

A client asked me a pertinent question yesterday, along the lines of: “Do the pensions changes announced in the last Budget still stand given that they are not yet enshrined in legislation and Parliament is soon to be dissolved?

The short and unhelpful answer is: “It depends…”  But what exactly does it depend upon?

By way of a reminder the main pensions changes relate to a reduction in the money purchase annual allowance, a new tax charge on overseas transfers, and amendments to the tax treatment of foreign pensions.

As a start point it is helpful to consider the usual process following a Budget (but please note that this is only a summary).

  • Problem. Income and corporation tax can only be charged in a year for which a Finance Act provides that they may be charged. Given that the Budget was in March (i.e. towards the end of one tax year) and the Finance Act would not normally receive Royal Assent until the summer (i.e. after the start of the next tax year) the Government needs authority to collect taxes during the gap period (i.e. from the start of the tax year until the date of Royal Assent).
  • Solution. A series of ‘ways and means resolutions’, known as the Budget Resolutions, giving the Government the authority it needs are normally debated and passed shortly after the Budget. Once passed, Budget Resolutions have the force of an Act of Parliament but cease to have effect if the Finance Bill does not get a second reading in the House of Commons within 30 days of its publication, or if the Finance Bill does not get Royal Assent within seven months.

However, we now have a general election to throw into the equation. The Budget Resolutions will also cease to have effect on 3 May, the day Parliament is dissolved in anticipation of the election.

The current Finance Bill is the longest on record stretching to over 760 pages. Pensions may have escaped relatively lightly in this year’s Budget (for a change) but the Bill also contains a lot of complex legislation that fundamentally redefines some of the bases for taxation in the UK. With proper scrutiny of Finance Bills in recent years being a particular area of concern for both practitioners and the House of Lords Treasury Committee alike, one would hope that a Bill this weighty and important would not be rushed through in full.

What next?

A Finance Bill of some description will need to be passed before Parliament is dissolved. As a result, the current Bill is likely to be split into two (or possibly even three parts) with the first part being debated and passed very quickly to give the Government the necessary powers to continue to raise taxes and allow any other ‘uncontroversial’ provisions to become law without further debate. The Government is likely to include provisions in that first Bill that have already been the subject of public consultation and anything else the opposition parties allow. We do not yet know whether pensions provisions will form part of the legislation that is considered to be ‘uncontroversial’, and therefore enacted quickly under this ‘wash-up’ process, but the shortened (if at all) Bill is expected to complete all remaining stages of its passage through the House of Commons on a single day, next Tuesday, 25 April.

Depending on the result of the election, the excluded provisions (if any) will be represented to the House as a further Finance Bill post-election and will be debated in accordance with the more normal procedures. As a result of the election and summer recess, the timing of Royal Assent for that further Bill is unlikely before September 2017. To complicate things yet further, again entirely dependent on the result of the election, it is also possible that there could be an emergency, summer, Budget in late June or early July…

The good news is that the proposed move to an autumn Budget should reduce these types of complications in the future… assuming, of course, that proposal itself survives into the new Parliament.

Please contact your usual member of the pensions team if you need any help on what action your pension plan may need or wish to take in anticipation of the Budget changes.

Scottish court delivers Knight in shining armour to four pension plans

Ever heard the phrase “omnia praesumuntur rite esse acta”?  Me neither, until a Scottish court handed down its judgment in the case of Knight v Sedgwick Noble Lowndes.

It has been known for some time that the Scottish courts generally take a pragmatic approach to the construction of pension plan documentation. For example, in a 2010 case a Scottish court stressed that if the purported exercise of a pension plan’s amendment power is clear and put into written form, there is no need for the court to be unduly restrictive in considering whether the amendment power has been complied with. Contrast this with the approach of the English courts where, generally speaking, fairly robust evidence is required to establish compliance with the requirements of an amendment power.

The Knight case has brought this into focus again. The case concerned whether normal retirement ages had been validly equalised under four defined benefit pension plans before they subsequently transferred into another plan. The specific requirements of the amendment power under each pension plan were different but, generally speaking, amendments were to be evidenced by specified documents such as a written resolution/memorandum.  Extensive searches were undertaken in relation to each plan, but the evidence found did not “dot the i’s and cross the t’s” in relation to each amendment power.

The evidence found varied in each case but it included minutes of meetings and announcements to members, plus various other items of correspondence alluding to a decision to equalise benefits. The Scottish court relied on the maxim “omnia praesumuntur rite esse acta” (i.e. the presumption of regularity) in ruling that all four pension plans had been amended to equalise normal retirement ages from the dates on which this purportedly occurred.  In other words, the court was comfortable that there was a clear intention to equalise benefits based on contemporaneous evidence, despite the fact that key documents  relating to the exercise of the amendment powers had not been found.

Many have applauded this as a “common sense” approach from the Scottish courts. Whilst the “presumption of regularity” is a recognised maxim under English law, reported cases south of the border suggest that it has had only limited application in England to date in the pensions context. It could potentially be of assistance in a situation where there is a formal document in place but some evidence is missing as to its technical completion (such as due notice to directors of a board resolution, or proper delegation of the signatory to a resolution).  Whether it will be given greater weight in the future remains to be seen.

As ever, if you have any queries relating to this or you feel it has application to your pension plan, please contact us.

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