7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days:

• Bradbury vs British Broadcasting Corporation – 15 May 2015
• Heis and others v MF Global UK Services Ltd – 2 April 2015
• TPR publishes 2015 annual funding statement
• TPR notifies “micro” employers of auto-enrolment obligations
• NAPF publishes Securities Fraud and Investor Remedies guidance
• Financial Ombudsman finds an increase in complaints regarding annuities
• Labour confirms new shadow pensions minister
• Cessation of DB contracting-out: research

Bradbury vs British Broadcasting Corporation – 15 May 2015

The High Court has concluded that the PO was entitled to determine that the BBC’s conduct in seeking to impose a 1% cap on increases to pensionable salary through the mechanism of scheme members’ pay awards did not amount to a breach of the implied duty of trust and confidence which arises from an employees’ employment contract.

Please click here for a summary of the decision.

Heis and others v MF Global UK Services Ltd – 2 April 2015

In this case the High Court considered whether a service company, which employed all the staff within a group and seconded most of them to the principal operating company, was entitled to an indemnity from that company against a section 75 liability (employer debt).  It was common ground that there was no express agreement between them.

Please click here for a summary of the decision.

TPR publishes 2015 annual funding statement

TPR published its 2015 annual funding statement on 22 May 2015, setting out its analysis of current market conditions and how sponsoring employers and trustees of DB pension schemes can agree appropriate funding plans.  The statement acknowledges that many schemes are likely to experience larger deficits than at their last triennial valuation due to changing market conditions. Alongside the funding statement, TPR has published supporting analysis and evidence.

Stephen Soper, executive director for DB at TPR, said: “Our annual funding statement should give confidence to employers that supporting DB schemes is not a barrier to investing in their business, and that for trustees, taking an integrated and proportionate approach to managing risks can help a scheme improve its own situation over the longer term. The strong performance of all asset classes during improved economic conditions have benefited pension funds. But persistent low interest rates and falling gilt yields mean that it remains a very challenging environment for DB schemes with 2015 valuation dates. Scheme trustees that have followed the DB code and have assessed their options with their employer should be in a better position to cope with these changes in market conditions.”

TPR will be continuing its approach of selecting a number of schemes for proactive engagement ahead of their valuations being submitted. It has already contacted all the schemes with valuation dates between September 2014 and September 2015 (Tranche 10) which have been selected for proactive engagement.

As part of its work to help trustees understand the DB funding code, TPR also aims to publish in the near future practical guidance on assessing the sponsoring employer’s covenant, an integrated approach to managing risk, and setting an investment strategy.

TPR notifies “micro” employers of auto-enrolment obligations

TPR is in the process of sending initial letters to “micro” employers, the final tranche of employers who will join the Government’s automatic enrolment initiative. This includes some families with nannies, carers, gardeners and cleaners. Micro employers are generally being phased into automatic enrolment between 1 June 2015 and 1 April 2017, depending upon individual staging dates.

NAPF publishes Securities Fraud and Investor Remedies guidance

The NAPF published their ‘Made Simple’ guide for pension fund trustees and managers on 19 May 2015. The guide aims to give pension funds an introduction to the essential remedies and procedures available to pursue legal claims when affected by securities fraud. Joanne Segars, NAPF Chief Executive, commented: “The cost of financial misconduct can be significant to pension funds, and it’s important that schemes understand what securities litigation is and how claims can be pursued, so that should schemes find themselves the victims of securities fraud they are in a position to make informed decisions on behalf of their members.”

Financial Ombudsman finds an increase in complaints regarding annuities

The Financial Ombudsman Service has published its annual review for the financial year 2014/2015. The review found that there were 776 complaints regarding annuities – an increase of nearly 30% on the previous year. Many complaints stemmed from consumers not being informed about the availability of enhanced annuities, and from not shopping around beyond their original provider. The Financial Ombudsman Service noted that increased publicity around annuities in 2014 may have led to a surge in awareness and complaints.

Labour confirms new shadow pensions minister

The Labour Party has announced that Lord Keith Bradley will be the Shadow Pensions Minister in the next parliament. Lord Bradley replaces Gregg McClymont, who lost his seat in the General Election. Lord Bradley has been a life peer in the House of Lords since 2006, after being Labour MP for the Manchester Withington for many years.

Cessation of DB contracting-out: research

A couple of recently-published reports show that a majority of schemes still need to take action in relation to the end of DB contracting-out in April 2016. Research from Towers Watson found that 69% of employers with DB plans had as yet not decided how they would react to the changes. Half of the companies that had decided on a course of action noted that they plan to close their DB scheme to future accrual.

Mercers also reported, in a recent poll of their clients, that 66% of responding schemes and sponsors still need to review their arrangements ahead of the reforms.