Much ado about plenty

Despite the difficult economic conditions, and aside from routine commercial support functions, pension lawyers continue to be as busy as ever. Government initiatives and legislative complexity and deficiencies continue to provide fertile areas of new business opportunity. So what can the humble pension lawyer look forward to grappling with in the coming months? Here are a few likely areas:

Refund of surplus to employer

Any existing action of trustees to pass an appropriate resolution retaining power to return surplus to a sponsoring employer should be completed. While the forthcoming Pensions Act is to extend the deadline for that to 5 April 2016 and clarify aspects of the previous legislation, it is disappointing for sponsoring employers and trustees that this further legislative intervention will come too late for those who were concerned to ensure that an existing power be preserved.

Eliminating unlawful discrimination

Case law continues to inform the effectiveness or otherwise of steps taken in the past to eliminate unlawful discrimination (particularly sex discrimination arising from different normal retirement ages). Review of historical “amendments” is likely to continue.

Additional paternity leave

Rights to additional paternity leave are to be introduced in relation to children born on or after 3 April 2011. Again, scheme rules and booklets may require to be reviewed to ensure that additional benefit does not inadvertently accrue if that is not what is intended.

“New” tax regime – Finance Act 2004

When the pensions tax regime was “simplified” with effect from 6 April 2006 (“A-Day”) (by adding another layer of complexity), overriding regulations provided for a five-year period in relation to which certain features of the previous regime continued to apply and discretionary powers were given to trustees to refuse to make “unauthorised payments” under the new regime. Clients who have thus far relied upon the transitional regulations will not be able to do so beyond 5 April 2011. Appropriate A-Day documentation will require to be adopted by clients in advance of expiry of the transitional regulations if potential exposure to additional liability, and additional administration complexities, are to be avoided.

Further tax changes

The coalition Government wasted little time in coming forward with proposals to make changes to the post A-Day pensions tax regime, in particular reducing the annual allowance with effect from 6 April 2011 to £50,000 (from £255,000) and lifetime allowance with effect from 6 April 2012 to £1.5 million (from £1.8 million). While various transitional provisions and reliefs are to apply, much work will require to be done to ensure that all the forthcoming changes are appropriately catered for in schemes’ documentation.

Pension increases

While the Government has affirmed its intention to use the consumer price index (CPI) as the basis for statutory minimum revaluation and indexation requirements rather than the retail price index (RPI), it seems that it has been decided that it would not be appropriate to override schemes’ rules to require the use of CPI indexation where those rules refer explicitly to RPI. Review of rules both current and historic will be required to establish what basis should apply, and in what circumstances and to what benefit. A whole host of different permutations with attendant complexity and expense in administration is likely to result.

Default retirement age – no more

The DWP confirmed in its recent consultation response the phasing out of the default retirement age of 65 over the period April to October 2011. Whilst it seems sensible to provide linkage between the default retirement age and the rising state pension age, choosing to go beyond that seems particularly ill conceived at a time when youth unemployment levels are estimated to be approaching 20%. Scheme provision will require to be reviewed to ensure appropriate steps are taken and flexibilities are built in, all with a view to avoiding age discrimination claims.

Further detail is awaited but it is to be hoped that the various exceptions, highlighted in the consultation response, to the principle of equal treatment are introduced in a sensible way, in particular in relation to the provision of group risk insured benefits and the setting of normal retirement ages.

Auto enrolment

Notwithstanding the strained financial climate it seems that the DWP is intent on phasing in the requirement for auto enrolment of eligible employees to a qualifying workplace pension scheme with effect from October 2012. Advice and guidance to relevant employers on their obligations and the compatibility or otherwise of their existing pension arrangements will be required well in advance of introduction.

With ongoing Government consultations affecting pension provision currently numbering in excess of eight, it seems (thankfully) that pension lawyers will continue to be busy and in demand.