PASA guidance note on GMP equalisation issues
PASA has published a further guidance note looking in detail at HMRC’s two statements on tax issues arising from GMP equalisation processes. The guidance provides useful commentary on current issues and difficulties and some possible practical solutions.
The note explains in some detail issues identified by practitioners when considering how HMRC’s guidance applies in practice, relating to the annual allowance (including the deferred member carve-out) and lifetime allowance tests and protections. It also provides two template letters to members, describing the tax effects of recalculated benefit crystallisation events and providing an arrears schedule that could be forwarded to HMRC. The note does not cover GMP conversion (PASA intends to publish separate guidance on this) or historic transfers (PASA will update this note in due course to reflect the most recent Lloyds decision and any guidance).
Read the guidance note.
The Pensions Regulator (TPR) has published a blog post summarising the main areas of the Pension Schemes Act 2021, and noting that as a result of the Act, it will need to update a number of Codes and issue new guidance. The post also notes that TPR will publish a climate strategy in the next few months looking at the new climate change and governance requirements for pension schemes and at the way TPR works with other regulators to ensure that climate change risk is properly priced into the system.
Read the blog post.
TPR has added a case study to its relationship supervision page, providing details of its work with the trustees of a defined benefit scheme. Starting in November 2019, TPR looked at the scheme’s governance and administration, including its funding and risk management. The report notes that as a result of this interaction, the employer agreed to increase deficit repair contributions from £18 million per year to £33 million per year and also improved communications with members. In addition, the trustees undertook a number of training exercises, including one on environmental, social and governance issues.
Read the case study.
The Employment Appeal Tribunal (EAT) has held that, where rules in the firefighters’ pension scheme had a discriminatory impact, authorities could not use the fact that those rules were set out in statutory instruments as a defence to member claims: London Fire Commissioner and others v Sargeant and others.
The McCloud and Sargeant litigation in recent years resulted in a decision by the Court of Appeal that transitional provisions in the pension schemes for judges and firefighters were discriminatory on the grounds of age. Section 61 of the Equality Act 2010 provides that the rules of an occupational pension scheme must be taken to include a non-discrimination rule and that the scheme’s provisions take effect subject to that rule; the Act also provides that there is a statutory defence to a claim of age discrimination where a scheme’s trustees or managers are applying a ‘requirement of an enactment’. The question before the EAT was whether firefighters could bring claims of age discrimination, or whether the various Fire and Rescue Authorities against whom the claims were brought had a defence on the basis that they were implementing rules pursuant to a ‘requirement of an enactment’.
The EAT held that section 61 prohibits discriminatory treatment on the grounds of age and that this took priority over elements of the rules (based on secondary legislation) that required the Authorities to act in a discriminatory way. If a provision required discriminatory treatment by the scheme, then that provision was subject to the non‑discrimination rule. In acting in a discriminatory way, the Authorities were not doing something they were required to do by the regulations, but were contravening the Equality Act in a way that they are required not to do by the scheme’s non-discrimination rule. In addition, under section 62 the Authorities had power to pass a resolution making non-discrimination alterations, and so were not obliged to follow the statutory requirement. They could not therefore use this as a defence.
The ruling includes detailed analysis of the operation of the non-discrimination rule in section 61, and related provisions.
Read the decision.