Pensions and Employment: Pensions Bulletin

Transcription

1 Pensions and Employment: Pensions Bulletin ISSUE 04 Legal and regulatory developments in pensions In this issue Time is running out Pensions Bill 2013 Transaction charges in DC schemes Abolition of contracting-out: no statutory override for protected persons Auto-enrolment Proposed exceptions to employer duties: Government response to consultation Tax HMRC Newsletter 60: Helpline, tax protection reminders and liberation update Cases Pension rights for civil partners: Walker v Innospec Equalisation notice effective to amend trust deed and rules: Vaitkus v Dresser-Rand UK Limited Trustee decision to end discretionary increases incorrectly made: Ombudsman s determination in relation to Mr Wood Limitation of action: BT v Luck Age discrimination: Compulsory retirement of police officers: Harrod v Chief Constable of West Midlands Police Olympic Airlines: leave to appeal granted Points in Practice Asset-backed contributions: New PPF answers to FAQs Miscellaneous Pensions Law Update Seminar To access our Employment/Employee Benefits Bulletin click here. Contents include: Business transfers and collective agreements ACAS early conciliation: final regulations published Discrimination: Employer not liable for acts of sub-contractor s employee UK challenge to CRD IV bonus cap application published Employee shareholders: HMRC publishes new capital gains guidance Flooding: TUC guidance for employers Back issues can be accessed by clicking here. To search them by keyword, click on the search button to the left. Find out more about our pensions and employment practice by clicking here. For details of our work in the pensions and employment field click here. For more information, or if you have a query in relation to any of the above items, please contact the person with whom you normally deal at Slaughter and May or Rebecca Hardy. To unsubscribe click here.

2 Time is running out for applying for Fixed Protection 2014 The deadline for applications for Fixed Protection 2014 ( FP 2014 ) is Saturday 5th April, On 6th April, 2014 the lifetime allowance ( LTA ) reduces from 1.5 million to 1.25 million. Applying for FP 2014, which protects an LTA of 1.5 million, is simple and can be done online. It requires no input from the schemes in which the member holds benefits. Action point: Care will be needed where retirements are due shortly before 6th April, A benefit entitlement for tax purposes will not usually arise until all steps have been taken to ensure that the benefits can be paid. In practice the date of entitlement for tax purposes can therefore slip. For more information see our update on reduced allowances that accompanied Pensions Bulletin 13/19 Where a member is close the current 1.5 million lifetime allowance, it may be advisable for the member to apply for FP 2014 as a precautionary measure, in case the entitlement for tax purposes in fact arises later than expected for certifying or re-certifying contingent assets The deadline for submitting documents supporting certification or re-certification of contingent assets is 5 pm on Monday, 31st March, Further guidance is in the Focus and Action Plan that accompanied Pensions Bulletin 14/01 on 16th January, 2014 For more information, please get in touch with your usual pensions contact at Slaughter and May to take steps to seek to avoid the loss of partial recovery of VAT on investment management fees and potentially to improve the position to 100% recovery Following a change in HMRC s practice on the recoverability of VAT borne on pension scheme management expenditure announced on 3rd February, 2014, if no action is taken, employers who currently recover 30% of the VAT on investment management fees in relation to their pension scheme will lose all of that recoverability with effect from 2nd August, However, there is potential scope for restructuring the position so as to recover 100% of the VAT. For more information see our Focus that accompanied Pensions Bulletin 14/03 Comment: This is not something that can be done at the last minute. Although 2nd August, 2014 is the date when, if nothing else is done, recovery of the 30% VAT is lost, the earlier the action is taken to change the position, the earlier there is a prospect of moving to recovery of 100% of VAT. If you believe your scheme may be affected by the change in practice (i.e. you currently take advantage of HMRC s 70:30 split) please get in touch with the person you deal with here on pensions matters to discuss the position further. Pensions Bill Transaction charges in DC schemes In a written Ministerial Statement on 24th February, 2014, Steve Webb, Pensions Minister, announced an amendment to the Pensions Bill 2013 to require transparency for transaction charges in workplace DC schemes. The amendment will introduce a regulation making power. The Minister said the Government remains committed to introducing a cap on charges in default funds in schemes used for automatic enrolment during the life of this Parliament. He also said 2

3 the Government s response to its October, 2013 consultation on charges, and further proposals on quality and transparency in workplace pension schemes will be published soon. Action point: For noting. The Pensions Bill 2013 underwent Report Stage in the House of Lords on 24th February, Abolition of contracting-out: no statutory override for protected persons On 12th February, 2014, the DWP published its response to its 18th January, 2013 consultation on whether employers who sponsor schemes which include members who are protected persons should be able to use the statutory override in the Pensions Bill The statutory override allows employers to change scheme rules without trustee consent to reflect the increased NICs resulting from the end of DB contracting-out on 6th April, The Government has decided that employers should not be allowed to use the statutory override to alter their pension schemes in relation to members with protected person status. It believes the issue can be resolved through negotiation between employers and employees. Approximately 60,000 individuals ( protected persons ) are employed in formerly nationalised industries where the employers and trustees are limited in their abilities to change the scheme rules by legislation made during privatisation. Unsurprisingly, respondents to the consultation expressed strongly polarised views. Trade unions and trustees were against allowing the override to apply to protected persons but employers and pension advisers were in favour, noting that protected persons have in many cases ended up with more generous pension terms than their counterparts who remained in the public sector, where changes have been made in recent years. The Government intends to make the appropriate legislative changes to the Pensions Bill to ensure the statutory override cannot be applied in respect of scheme members with protected persons status. Action point: For noting, unless you have members with protected person status. Auto-enrolment Proposed exceptions to employer duties: Government response to consultation On 12th February, 2014, the DWP published its response to the proposal in its March 2013 consultation paper Technical changes to automatic enrolment to provide regulation-making powers in the Pensions Bill to exclude workers of a prescribed class or description from the scope of automatic enrolment. The DWP has identified 4 situations where it believes there is a strong case to permit employers not to enrol workers. The categories are workers who: have tax protected status for existing pension savings, are on the brink of leaving employment, have given notice of imminent retirement, or have recently cancelled membership after being contractually enrolled. Situations raised by respondents which the DWP considers should not be covered by an exception include: cases of serious ill-health, the very low and very high paid, and new starters, short term and casual hires. 3

4 The DWP notes the complexity and burden of the existing information requirements and says it plans to review these. The DWP says it will publish final proposals and draft regulations for consultation in due course, expected to be once the Pensions Bill 2013, which contains the power under which the Regulations are to be made, receives Royal Assent. The consultation response is on the DWP website Comment: The confirmation that the Government intends to exempt from auto-enrolment those with tax protection is welcome. Auto-enrolment was not designed to benefit those with sufficient pension savings to warrant tax protection. But the changes will come too late to help those who employers staging dates have already passed (although such employers will not then have to go through the re-enrolment process with their tax protected employees). TAX HMRC Newsletter 60: Helpline, tax protection reminders and liberation update HMRC s Pensions Tax Newsletter was published on 14th February, It notes: changes to the Pension Scheme Services contact us webpage. This now sets out what HMRC will deal with on its Helpline, what needs to be requested in writing, and where to find details of online guidance. HMRC is increasingly receiving calls from scheme members and their representatives asking for financial and tax planning advice or asking it to consider hypothetical situations. All it can do when faced with such requests is direct callers to the online guidance, that the window for applying for Fixed Protection 2014 closes on 5th April, The newsletter sets out how this is done and who can apply, that the application form for Individual Protection 2014 is expected to be available online from August, 2014, HMRC s findings following its October, 2013 changes to the pension scheme registration process to combat pension liberation (Pensions Bulletin 13/18). Early indications suggest that the number of new schemes applying for registration has fallen compared to the same period last year. Since the new rules took effect, HMRC has received 2,717 applications to register new schemes compared with 4,067 for the same period in the previous year. To date about 75% of these have been registered. HMRC has refused registration for about 5% of applications. When no problems are identified at the initial risk assessment, around 90% of schemes are being registered within 5 working days, and an address has been introduced for requesting confirmation of registration status for proposed pension scheme transfers. Requests sent by must include a scanned copy of a letter requesting confirmation of registration status, including all the relevant scheme details. More information on mitigating risk on transfers out to possible pension liberation schemes is in Pensions Bulletin 13/09 The Newsletter is on HMRC s website Action point: For noting. Cases 1. Pension rights for civil partners: Walker v Innospec A. Overview 1. On 18th February, 2014, the EAT overturned the Employment Tribunal s decision that the Equality Act 2010 exemption restricting access 4

5 to pension benefits attributable to pensionable service before 5th December, 2005 for surviving civil partners (the Equality Act exemption ) was incompatible with the EU Equal Treatment Framework Directive (2000/78/EC) (the Directive ). 2. The EAT held that the Equality Act exemption 1 was compatible with the Directive. Even if it had not been, it could not have been interpreted, as the Employment Tribunal had held, so as to permit Mr Walker s claim. To do so would be diametrically opposed to the clear wording of the Equality Act exemption, to the thrust of the legislation in this particular respect, and to the apparent intention of Parliament. B. Background 1. The Civil Partnership Act 2004 came into force on 5th December, 2005 and, subject to paragraph 2 below, requires registered civil partners to be treated in the same way as spouses on the death of a member, but, relying on the Equality Act exemption, only in relation to pensionable service from 5th December, In paragraph 18 of Schedule 9 to the Equality Act Contracted-out schemes are required: 2.1 in respect of GMPs accrued from 6th April, 1988 to 5th April, 1997, to treat civil partners in the same way as widows/widowers, and 2.2 in respect of pensionable service from 6th April, 1997 to 4th December, 2005, to provide civil partners with the minimum benefits required to satisfy the reference scheme spouse test. 3. The Equality Act 2010 imports into occupational pension schemes a non-discrimination rule prohibiting trustees from discriminating against members or prospective members in relation to certain protected characteristics including sexual orientation. 4. As mentioned, the Equality Act 2010 also carves out, from the requirement not to discriminate on grounds of sexual orientation, any right accrued prior to, or attributable to pensionable service prior to, 5th December, 2005 (but see 2 above for contracted-out schemes). C. Facts 1. Mr Walker ( W ) was a member of the Innospec Pension Scheme (the Scheme ) from January 1980 until 2003, when he retired on an annual pension of approximately 85,000. In 2006, W entered into a civil partnership with his longstanding partner. 2. The scheme provided a spouse s pension on the death of a member. In August, 2006, the scheme was amended to the extent necessary to comply with legislative requirements relating to benefits payable to surviving civil partners where a civil partnership has been entered into in accordance with the Civil Partnership Act W sought confirmation that his civil partner would benefit from a spouse s pension. He was informed the company has confirmed that, for pension purposes, individuals who entered into a civil partnership will be treated as married couples for service since 5th December, In the event of W s death, his civil partner would therefore be entitled to a spouse s pension of only 500 a year (based on his contracted-out rights). This compared with the 41,000 annual spouse s pension. 4. W claimed that this amounted to unlawful discrimination on grounds of sexual orientation. The employer relied on the Equality Act exemption. 5

6 5. The Employment Tribunal held that W had suffered both direct and indirect discrimination in breach of the implied non-discrimination rule. 6. Although on the face of it, the Equality Act exemption was incompatible with the Directive, the Tribunal found it could be interpreted in such a way as to be compatible. Either way, the employer could not rely on it. There was no clear statutory language to the effect that Parliament had intended the Equality Act exemption not to conform with the Directive. To interpret the exemption so as to make the Equality Act 2010 Directive-compliant would not involve the departure from a fundamental feature of the legislation, which was the prohibition of discrimination. D. EAT judgment (1): is the Equality Act exemption compatible with the Directive? 1. The EAT noted that paying a survivor s pension to a spouse of the opposite sex but not to a partner of the same sex with whom the partner has registered a civil partnership discriminates between the spouse and partner on the grounds of sexual orientation. But until the Civil Partnership Act 2004 came into force on 5th December, 2005 such discrimination was not unlawful. 2. It is established that pensions is deferred pay. Discrimination on the grounds of sexual orientation would no more found a claim in respect of deferred pay earned during pre- 5th December, 2005 service than it would for women who were paid less than men prior to the introduction of the right to equal pay. 3. The fact that pension was deferred pay, earned by an employee through service with his employer, in the same way and at the same time as salary is earned, was critical to the issue to be determined here. Deferred pay is subject, in amount and as to any conditions attaching to its payment, to the law relevant to earnings at the time. 4. The CJEU decisions in Barber 2 and Ten Oever 3 made it clear that, where pension accrues on a discriminatory basis at a time when discrimination is not unlawful, but it is unlawful at the time the pension comes into payment, the payer is not obliged by law to remedy the past discrimination at the time of payment. Although those cases relate to sex discrimination there was no reason to think that same rules would not apply to sexual orientation discrimination. 2 Barber v Guardian Royal Exchange Assurance Group (Case C-262/88) [1990] ICR (Case C 109/91). 5. The Employment Tribunal had relied heavily on the CJEU decisions in Romer 4 and Maruko In Romer, the CFEU found that it was unlawful sexual orientation discrimination not to provide a German national who had entered into a registered life partnership (the German equivalent of a civil partnership) in 2000 with the same survivor benefits he would have received had he been married. But the court held that equal treatment was required only from 2nd December, 2003, the deadline for transposing the Directive in national law, not from the date Mr Romer had entered the partnership. 7. In Maruko, another German case on registered life partnerships, this time involving a DC scheme, Mr Maruko s application for a widower s pension following the death of his partner in 2004 was rejected on the basis that the scheme rules made no provision for survivors benefits to be paid to registered life partners. The CJEU held this amounted to unlawful discrimination. The Court rejected the suggestion that the entitlement to survivors benefits should be limited to periods on or after 17th May, 1990, the date of its judgment 4 Romer v Frei und Hansestadt Hamburg (Case C-147/08) 5 Maruko v Versorgungsanstalt der deutschen Buhnen [2008] All ER (EC) 977 6

7 in Barber. Because the scheme was DC in nature, unlike in Barber, there were no funding implications arising from the requirement to equalise. 8. The EAT distinguished both cases on the basis that German law did not provide for different treatment of benefits by reference to the period of service which had given rise to them i.e. it contained no equivalent to the Equality Act exemption. The German law provided for equality at the point of payment. But that does not mean that the Directive requires such treatment. 9. In summary, the Directive did not purport to have retrospective effect such that inequalities in pay arising on the basis of sexual orientation prior to the date it was to be transposed could form the basis of a claim after transposition though they could not have done before. The Directive is intended to ensure equal treatment as between those with different sexual orientations but who are (viewed broadly) in comparable situations after transposition. The Equality Act exemption does not infringe that principle. Nor is it contrary to the Directive to leave past discrimination unremedied. E. EAT judgment (2): direct or indirect discrimination? 1. The EAT went on to consider whether, had the Equality Act exemption been incompatible with the Directive, the difference in treatment would have amounted to direct or indirect discrimination on grounds of sexual orientation. 2. The EAT concluded that the position of spouses and civil partners in the UK in relation to pension benefits meant that they were in broadly comparable situations. This was both by virtue of legislation (in particular Section 23 of the Equality Act 2010) and the Supreme Court decision in Bull v Hall 6 (concerning a Christian hotel keeper who refused a double bedded room to a same sex couple who had entered a civil partnership). 3. According to the EAT, what is required is sufficient comparability rather than an exact match. That was the case here. 4. If the EAT had found that spouses and civil partners were not in a sufficiently comparable position to found a claim for direct discrimination, it would have been necessary to consider the Employment Tribunal s conclusion that there was indirect discrimination that had not been justified. 5. The Tribunal had found that the employer had failed to produce any evidence as to whether the discrimination was a proportionate means of achieving a legitimate aim. The EAT noted that the employer s aim was to exclude uncertain risks when funding the scheme. It accepted that the employer had advanced insufficient evidence of the scale of additional funding risk if civil partners were to be treated identically to spouses so as to demonstrate that it was proportionate to discriminate. 6. Notwithstanding that the Government had now produced material showing that an extension of survivors benefits in respect of previously accrued pension entitlement would give rise to additional costs ranging between 88 million and 3 billion, the Tribunal was entitled to conclude as it did in respect of the absence of justification. The employer s appeal on this ground was rejected. 7. Accordingly, whether viewed as direct or indirect discrimination, there was discrimination which, but for the Equality Act exemption, would have entitled W s civil partner to a full survivor s pension should W have pre-deceased him. 6 [2013] UKSC73 7

8 F. EAT judgment (3): If the exemption had been incompatible, could it be read so as to be compatible? 1. For the otherwise incompatible exemption to be interpreted in such a way as to make it compatible, Parliament must clearly have adopted a legislative choice directly at odds with that required by the Directive. 2. The Equality Act exemption was specific and clear. Viewed broadly, the intention of Parliament was not to confer upon those who were civil partners a right equivalent in every respect to those who were married: it was to do so in every respect save in relation to survivor benefits. Parliament plainly intended that discrimination should be remedied in some circumstances, but not in all. Where Parliament creates a specific exception, it is less likely to be amenable to be written out by a process of interpretation. 3. The EAT considered it was being asked to legislate rather than interpret. It was confirmed in its view by the fact that many benefits such as those in question here accrued on a basis which it was legitimate to adopt at the time and which it was now being asked to invalidate retrospectively. The EAT was ill-placed to judge and provide for the consequences of such a decision: that was the role of Parliament. G. Comment 1. This is a well reasoned and helpful decision, restoring the issue of restrospectivity of EU legislation to that which everyone had previously assumed to be the case. 2. As a result, and unless appealed, pension scheme trustees can, as a matter of law, continue to rely on the Equality Act exemption so as to restrict pensions for surviving civil partners to those attributable to the period of member s pensionable service on or after 5th December, Note, though, that: 3.1 contracted-out rights are treated differently (see B.2 above), and 3.2 some employers may have chosen fully to equalise survivors benefits for civil partners. 4. The Equality Act exemption is replicated in the Marriage (Same Sex Couples) Act 2013 for same sex marriages (Pensions Bulletin 14/02). Note, though, that the Government is required to review the provisions relating to survivor benefits, and the cost of full equalisation, by 1st July, That review may or may not lead to a further requirement to equalise retroactively (i.e. for periods of service before 5th December, 2005). 2. Equalisation notice effective to amend trust deed and rules: Vaitkus v Dresser-Rand UK Limited On 31st January, 2014, the High Court held that a notice issued to female scheme members in 1991 was effective to equalise the scheme s Normal Retirement Date ( NRD ) at age 65 for men and women, despite a clear conflicting provision in a subsequent definitive trust deed and rules. The 1991 notice, which removed the right for a certain category of female member to retire from age 60 on an unreduced pension, was sufficient to: amend the scheme under the provisions of the interim trust deed and rules establishing the scheme, and amend the provisions of a definitive trust deed and rules signed in The Dresser-Rand UK Limited Pension Scheme (the Scheme ) was established on 6th April, 1988 by interim deed, Clause 11(a) of which provided that: the trustees will as far as is practicable operate the scheme so as to give effect to the Explanatory Literature. For the purpose of this deed, Explanatory Literature means any literature setting out the provisions of the Scheme (including any amendment of those provisions) and issued or to be issued to members and prospective members of it. 8

9 Clause 1(a) of the 1992 Definitive Trust Deed & Rules provided that the Deed shall be read and construed and shall take effect in like manner as if it had been executed on the same day as and immediately after the interim trust deed. The power of amendment was in Clause 5 and stated:...if notice in writing of any such alteration or modification shall be published in a form and manner agreed by the Principal Employer and the Trustees, the trusts powers and provisions of this Deed and of the Rules shall pending the execution of the Deed be deemed to be altered or modified in such manner and to such extent as the Principal Employer shall determine to give effect to the provisions set out in such notice. The rules on early retirement pension directly contradicted the 1991 notice. The parties applied to Court for directions on whether steps taken to equalise NRD from 6th April, 1991 were effective, in particular whether the 1991 notice was effective to amend the scheme from 6th April, 1991 and, if so, whether that was reversed by the 1992 Deed. The High Court held that the 1991 Notice: 1. amounted to Explanatory Literature within the meaning of Clause 11(a) of the interim deed and was therefore effective to amend the scheme from 6th April, 1991, and 2. was effective to amend the 1992 deed since clause 1(a) of that deed created the fiction that it dated from the interim deed. Consequently, the power of amendment in clause 5 took effect as if it had been in force on the same day and immediately after the interim deed. The 1991 Notice amounted to a sufficient act of publication to come within Clause 5. Comment: This decision is a reminder of the need to revisit whether steps taken to deal with closing the socalled Barber window in the period of uncertainty between 17th May, 1990 and the clarifications provided in the Coloroll cases in September 1994 were taken in a sufficiently robust manner. 3. Trustee decision to end discretionary increases incorrectly made: Ombudsman s determination in relation to Mr Wood A. Overview 1. On 9th January, 2014, the Pensions Ombudsman determined in this case (PO-1280) that the trustees of the Covidien UK Pension Plan (the Scheme ) had not reached a decision to end annual discretionary increases to pensions in payment in relation to pre-1997 service correctly. 2. The Ombudsman identified several factors that made the trustees decision faulty. 2.1 in deciding never again to award discretionary increases, the trustees had fettered their discretion under the scheme rules, 2.2 they had also failed to identify the relevant considerations, 2.3 they had not considered their obligations separately from the views of the employer, the joint decision maker, and 2.4 they had failed to document clearly their decision in that it had not been minuted or ratified in a trustees meeting. 3. The Ombudsman remitted the decisions for each year back to the trustees and directed them to pay the member 200 for distress and inconvenience. B. Facts 1. Mr Wood ( W ) was a member of the medical section (the M Section ) of his employer s scheme, Rule 11 of which stated that: all pensions in payment will be reviewed on a regular basis at such intervals as the Company 9

10 and the Trustees decide, and, if the Company and the Trustees agree, will be increased by any such amount as they decide, having regard to the sufficiency of the fund and after taking Actuarial Advice. 2. The M Section Booklet stated: the Company intends to make regular reviews to pensions whilst in payment and aims to make adjustments to pensions on a discretionary basis to provide a level of protection against inflation. 3. W retired in 1999 and received yearly increases until 2011 in relation to both his pre and post April 1997 service except in 2010 when inflation was negative. His former employer was taken over in 2000 and the M Section was merged with the Covidien UK Pension Plan. As a pensioner member, W s pension remained subject to the M Section rules that applied to him before the merger. 4. An from the Scheme administrator to the Scheme trustees in April, 2012 said there would be no additional funding strain if discretionary increases in relation to pre-1997 service were given to members of the M Section, including W. 5. In 2012, the Trustees decided in a conference call not to award future discretionary increases in relation to pre-1997 members previously in the M Section. An internal confirming the decision and a letter sent to W both stated that these discretionary increases had been inconsistent with other sections of the scheme. The decision was not minuted or ratified in a trustee s meeting. 6. W s subsequent appeal against the decision was dismissed by the trustees who said they had to consider the consequence on the scheme s funding position as whole. 7. W complained to the Ombudsman. C. Decision 1. The Ombudsman upheld W s complaint. He accepted that Rule 11 clearly required that pension increases for pre-1997 service should be at the trustees and company s discretion and might not be awarded. 2. However, the trustees had not reached their decision to end discretionary increases correctly because: 2.1 they had fettered their discretion by deciding to no longer make discretionary increases. The decision breached the requirement in Rule 11 that they undertake reviews regularly, 2.2 they had not identified the relevant considerations. They had stated that consistency with the other sections of the scheme was a factor, but evidence showed there was no consistency. In addition, the administrators had indicated there would not be a funding issue if discretionary increases were paid, 2.3 the discretion in Rule 11 was a joint one for the trustees and the company but the company did not seem to have played any role in it. Even if the decision had been mutual, the trustees had different interests to the employer and should have considered their own obligations separately from those of the employer, and 2.4 the trustees had failed to document clearly both their decision, and the steps taken and considerations brought into account in reaching it. 3. The Ombudsman remitted the decision as to whether to make the discretionary increases back to the trustees to be made afresh, noting that the trustees should also ask the company to make its own decision. Comment (1): This determination serves as a reminder that trustees and employers must follow due 10

11 process in reaching decisions and must act within the terms of the trust deed and rules to avoid failing into a similar trap. Comment (2): Although the likely outturn is that the trustees or the employer or both will decide, using proper process, that no increase should be granted, all affected pensioners could in theory have brought claims to the Ombudsman, resulting in a significant total payment for distress and inconvenience. 4. Limitation of action: BT v Luck On 17th February, 2014, the High Court decided that former employees of BT could bring a claim against BT for misrepresentation regarding pension arrangements when their employment was transferred to a joint venture between BT and Accenture in The former employees were not time barred from bringing the claim because the cause of action had not accrued until they had ceased membership of the BT Pension Scheme. Until August 2000, the claimants were employees of BT. Their employment was transferred to EPS, a joint venture established by BT and Accenture. Whilst employed by BT, the claimants were members of the BT Pension Scheme. They argued that BT represented to them that the terms of their employment (including pension) would be the same following their transfer to EPS and that their ability to participate in the BT Pension Scheme would not be prejudiced and would continue indefinitely. However, by a share acquisition agreement dated 28th February, 2002, BT sold its shareholding in EPS to Accenture and on 31st August, 2002 the claimants ceased to be members of the BT Pension Scheme. The replacement scheme (the Accenture HR Services Pension Plan) was a DC Scheme and therefore to their significant financial detriment. The claimants argued that the representations made by BT in August 2000 were false in that BT knew it would withdraw from EPS within 3 years and that the claimants would thereafter cease to be eligible as members of the BT Pension Scheme. They commenced proceedings against BT on 27th August, 2008, 3 days before the expiry of 6 years from their ceasing to be members of the BT Pension Scheme but more than 6 years from their being transferred to the employment of EPS. The judge noted that a cause of action in tort does not accrue until actual damage has been suffered. The claimants pension rights were only damaged when the claimants were moved into a different and less advantageous pension scheme. The claim was therefore within the 6 year time limit. 5. Age discrimination: Compulsory retirement of police officers: Harrod v Chief Constable of West Midlands Police On 5th February, 2014, the London Central Employment Tribunal held that the compulsory retirement of large numbers of serving police officers under Rule A19 of the Police Pensions Regulations 1987 following budget cuts was unjustified age discrimination. The ruling was a test case in relation to the decision by 7 police forces to use Rule A19 to require the compulsory retirement of a cohort of officers to meet budget cuts. Rule A19 provides that, if a police authority determines that the retention in the force of a police constable to whom the regulation applies would not be in the general interests of efficiency, he may be required to retire on such date as the Police Pension Authority determines. The rule applies only to police constables who, if required to retire, would be entitled to receive a pension of not less than 2/3rds of average pensionable pay ( full pension ) under the Police Pension Scheme. The 7 forces had decided to retire all officers who were eligible under A19 unless, in exceptional cases, their particular skills could not immediately be replaced. 11

12 The London Central Employment Tribunal held that the use of A19 was not justified in these circumstances and amounted to unlawful indirect age discrimination. 6. Olympic Airlines: leave to appeal granted The Supreme Court has granted permission to appeal the Court of Appeal s decision in Olympic Airlines SA Pension and Life Insurance Scheme v Olympic Airlines SA that the English Courts did not have jurisdiction to make a winding-up and in relation to a Greek company, with the consequence that the pension scheme was not eligible for entry into the PPF. Separately, in a House of Commons written answer on 4th February, 2014, Steve Webb, Pensions Minister, confirmed that the Government is actively exploring whether it can amend the PPF legislation on employer insolvency to enable members of the Olympic Airlines Pension Scheme to benefit from the PPF. Points in Practice Asset-backed contributions: New PPF answers to FAQs On 12th February, 2014, the PPF published on its website answers to 5 new FAQs on the provision of information in relation to asset-backed contributions ( ABC arrangements ). The answers relate to the new section on the scheme return on Exchange for ABC arrangements. If schemes have ABC arrangements, they must complete the necessary section on Exchange and specify the percentage of assets that the ABC arrangement covers in the asset section. But for the levy year 2014/15 only, the PPF says the asset breakdown information will not feed into the levy calculation. For levy calculation purposes, ABC arrangements will be included by the PPF within the asset category other. Comment: Although the PPF says that the asset breakdown does not feed into the levy calculation, the formulae for transforming Section 179 valuation results for levy calculation purposes applies a higher stress factor to assets in the other category than it does to other asset classes, including commodities, property and hedge fund investments. The answers to the new FAQs are on the PPF website Action point: For noting if you have an ABC arrangement. Miscellaneous Pensions Law Update Seminar We had to postpone our Pensions Law Update Seminar due to take place on 12th February, 2014 as it coincided with the second of Transport for London s 48 hour tube strikes. As a consequence, we have rescheduled the Update Seminar to Tuesday, 4th March, An invitation accompanies this bulletin. The rescheduled seminar takes place between 9.30 am and 1 pm and is followed by lunch. Please contact Events@slaughterandmay.com if you would like to book, even if you had already booked on the earlier seminar

13 This Bulletin is prepared by the Pensions and Employment Group of Slaughter and May in London. We advise on a wide range of pension matters, acting both for corporate sponsors (UK and non-uk) and for trustees. We also advise on a wide range of both contentious and non-contentious employments matters, and generally on employee benefit matters. Our pensions team is described in the 2014 edition of Chambers: on technical ability: the team s advice is always clear and logically set out ; on problem solving: members are creative in finding ways to help us ; and on responsiveness: we find individuals are very quick in their responses and work exceedingly hard. Our recent work includes advising: Unilever Plc on the creation of an innovative pension funding vehicle under which a unit-linked life policy was established to fund centrally certain overseas unfunded retirement benefit obligations General Motors, on the pensions aspects of the sale of Millbrook Proving Ground Limited (the test and engineering technology centre). The sale was dependent on structuring a pensions reorganisation so that the Millbrook Pension Plan and all pension liabilities were retained in the General Motors group ConocoPhillips, on complying with its auto-enrolment duties, including analysing how different categories of employees would be provided with pension benefits in compliance with those duties and setting up a new DC pension plan and a new registered life cover pension plan Royal Mail on a benefit change exercise which enabled Royal Mail to use some of the c 2bn of assets remaining in the Royal Mail Pension Plan following the 2012 transfer of its pension liabilities to HM Government to fund a 300 million a year gap which would otherwise have opened up between the pension contributions which it could afford and the amount which was required to keep the Plan open for the future accrual of benefits. We had previously advised on the 2012 transfer of approximately 30 billion of Royal Mail s historic pension liabilities to HM Government The Trustee of the General Motors UK Retirees Pension Plan, on the surrender in October, 2012 of 2 insurance policies and the purchase of a bulk purchase annuity policy with Rothesay Life. The transaction covered all or substantially all of the Plan s benefit obligations and had an aggregate value of approximately 230 million The Trustee of ConocoPhillips Pension Plan, on the UK pensions issues arising from the demerger of the ConocoPhillips downstream oil business in May, 2012, including establishment of a new mirror image defined benefit pension scheme for the downstream UK business. ConocoPhillips is a US company and a number of cross border issues arose from the pension demerger as a result. We coordinated our advice on these issues with legal advice from Cravath Swaine & Moore in the US GlaxoSmithKline plc on an arrangement under which from 1st April, 2013 increases in basic salary for employees in one of its defined benefit pension plans are capped at 2% pa. Pay increases which would otherwise have been awarded above that 2% pa level take the form of a non-pensionable salary supplement. If you would like to find out more about our Pensions and Employment Group or require advice on a pensions, employment or employee benefits matters, please contact Jonathan Fenn jonathan.fenn@ slaughterandmay.com or your usual Slaughter and May adviser. London T +44 (0) F +44 (0) Brussels T +32 (0) F +32 (0) Hong Kong T F Beijing T F Published to provide general information and not as legal advice. Slaughter and May, For further information, please speak to your usual Slaughter and May contact.