TPR gets stronger, the government weaker: Top 5 law and regulation stories from 2017

Despite two full Budgets, a general election and a change of pensions minister taking place during 2017, pensions policy output was notably muted.

The biggest stories of the year were largely those of government inaction; for example on inflation protection for older members and age-based tax relief. Courts and regulators maintained a busy agenda throughout.

With the Department for Work and Pensions review of auto-enrolment just published, and the upcoming white paper on defined benefit pensions expected by March, next year could be far more tumultuous. Here are our top five legal and regulatory stories from 2017.

TPR bares its teeth with first mastertrust fines

January 11

With public opinion demanding an increasingly proactive Pensions Regulator in the aftermath of BHS and Tata Steel, the watchdog decided to bring in 2017 with a salvo of fines aimed at mastertrusts failing to meet its standards of governance.

It levied fines of £5,020.70 against two trustee companies, representing four mastertrusts between them, the first such punishments handed out in that sector.

MC Trustees were ordered to pay the maximum of £2,000 for breaches involving the Nurture Mastertrust, while Countrywide Assured Trustee Services paid £3,020.70 for three breaches related to three mastertrusts referred to as the 'Save and Prosper Funds' in the regulatory intervention report.

In both cases, the schemes had failed to submit a chair's statement, a requirement only currently expected of defined contribution arrangements. Experts warned trustees of schemes with DB and DC sections not to think themselves exempt from this rule, as they might face similar fines from a newly invigorated regulator.

Pressure grows to provide pre-1997 inflation-proofing

February 27

Employer practices continued to be carefully scrutinised in 2017, with then-pensions minister Richard Harrington putting public pressure on companies including Hewlett Packard Enterprise and 3M for not granting pension increases to members with benefits accrued before 1997.

Harrington told a trustee conference that he had written to the employers demanding an explanation for the decision, which is entirely legal under UK law. Minimum increases in line with inflation were enshrined in the Pensions Act 1995, which came into force in 1997.

Nonetheless, older pensioners see their accrued benefits eroded each year by inflation while younger members do not. A briefing paper from the Hewlett Packard Pensioners Association showed that pre-97 benefits have already lost almost half their value.

Politicians from across the political spectrum spoke out in support of the pensioners affected. Where Harrington favoured a soft form of intervention, shadow pensions minister Alex Cunningham said he doubted this would work, while then-SNP pensions spokesperson Ian Blackford called for legislation to correct the injustice.

Since Pensions Expert broke the story, pressure has continued to mount, with the HPPA bringing their grievances to parliament and gaining cross-party support for legislation.

However, legal experts still doubt the scope for a law to enshrine pre-97 increases, which would legislate retrospectively to the detriment of companies.

Pensions slip down agenda after election

June 9

Theresa May’s gamble on a snap election in 2017 backfired spectacularly, losing her a majority in the House of Commons and making her government reliant on the support of the Democratic Unionist Party.

For pensions, that meant there was little chance of significant policy changes being made in 2017, according to experts.

They noted that statutory obligations would tie the government to a response to the Cridland review of state pension arrangements, a white paper on DB, and to carry out a review of auto-enrolment, but predicted that the DWP would do little else.

With the government reliant on the support of its Northern Irish allies, it would not be able to make more radical changes such as upping contribution rates under auto-enrolment, experts said.

Those predictions were largely borne out, and even contained some good news for schemes. With the pound plummeting, the FTSE continued its rise, posting positive returns for each of the past 12 months.

BBC pensions cap ruling offers reassurance to DB employers

July 31

Employers breathed a sigh of relief in July as the Court of Appeal approved the BBC’s decision to limit the extent to which pay rises for staff would add to its pensions bill.

The broadcaster had tried to tackle a multi-billion pound deficit in 2010 by offering members the choice between their existing plan with only 1 per cent of pay rises being pensionable, a new career-average section, and DC membership.

The move was brought before the Pensions Ombudsman in 2011 by a member of the BBC Philharmonic Orchestra. The case reached the High Court, returned to the ombudsman to consider new arguments, and was heard again in the High Court before reaching the Court of Appeal this year.

Pensions lawyers cautioned against concluding automatically that any employer can carry out the same changes with impunity. The wording of the BBC scheme’s rules was unusual and allowed it some flexibility, they said.

This case is one of a string of similar cases examining the employer’s right to manage its pensions bills.

Age-based tax relief rumours met with industry criticism

October 17

Chancellor Philip Hammond, it would appear, pays at least a little attention to the pensions industry and its publications.

Reports that he was considering a system of age-based tax relief were met with fierce opposition from experts speaking to Pensions Expert.

They said the move, which might have involved giving extra tax relief to young savers and cutting relief to older savers, would smack of ageism and create a distorted pattern of winners and losers.

Older workers desperately trying to improve their retirement provision would suffer yet another setback, said former pensions minister Ros Altmann.

Sure enough, the concerns were heard by the Treasury, and November’s Budget made no changes to pensions taxation, despite previous fears of further ‘salami slicing’.