15 September 2022
- Her Majesty, Queen Elizabeth II
- New Secretary of State for Work and Pensions announced
- Pay your pension some attention
- GMP equalisation – when is a forfeiture clause not a forfeiture clause?
- PASA updates its administration transfer exit agreements guidance
Her Majesty, Queen Elizabeth II lived a long life devoted to service and to our country. As a nation, we have lost a guiding light who has been a figure synonymous with our country both home and abroad for the entirety of most people’s lives. This marks the end of a long era in our country’s history and we express our deepest condolences to the Royal Family as they come to terms with their loss.
The formation of the new Government under Prime Minister Liz Truss has been suspended during the national mourning period, with a number of ministerial posts yet to be announced. These include the pensions minister at the DWP, which had been held by Guy Opperman under the Johnson administration.
In one of the last acts of Her Majesty’s reign, the Queen appointed Chloe Smith as Secretary of State for Work and Pensions. She replaces Thérèse Coffey who moved to become Secretary of State for Health and Social Care and Deputy Prime Minister.
Whoever takes up the role of pensions minister in the Truss administration will have a very full agenda to deliver on, but, if new to the post, should also take the opportunity to reassess what is needed and prioritise on the big issues in the relatively little time remaining before a General Election has to be called.
On 8 September 2022 the Pensions and Lifetime Savings Association, along with the Association of British Insurers, launched a campaign, funded by a number of major pension providers, whose purpose is to increase savers’ awareness of their pensions, including to track down pension savings from previous employments and to keep an eye on how their money for the future is building up.
This campaign follows an announcement back in April by the PLSA and ABI that it intended to run an “engagement season” campaign this autumn / winter and seemingly reprise it for the next two years (see Pensions Bulletin 2022/14).
A number of media events had been planned but have been suspended during the national mourning period. They will now take place in the week commencing 31 October 2022.
Some time ago the DWP set up a working group to investigate the concept of a “statement season” in which pension schemes would be required to send their statements to scheme members during a certain point in the year. We understand that the DWP is now not minded to go ahead with this, although there is not yet an announcement to that effect from the DWP. Perhaps the PLSA and ABI’s campaign is a better alternative?
An interesting and very technical High Court case, CMG Pension Trustees Ltd v CGI IT UK Ltd, has been reported which may be helpful for trustees conducting GMP equalisation exercises.
The CMG scheme had some historical problems of execution and administration – normal retirement date equalisation and a reduction in the accrual rate had not been effective from the dates that it had been thought they had (there was also an issue around pensionable salary but this error was rectified). The trustees and employers fixed this and offered members compensatory lump sums but by 2019 the employer wanted to close this off and pointed to the current Rule 5.11 which provides as follows:
“Notwithstanding Schedule II if a benefit or instalment of benefits is not claimed by or on behalf of the person entitled to the benefit or instalment in accordance with these Rules within 6 years of its date of payment it shall be retained by the Trustees for the purposes of the Scheme”
The question before the Court was whether this was an operable forfeiture clause. If it was not then it would be more difficult to close off the compensation scheme.
There followed a detailed exposition of the statutory provisions regarding forfeiture, the archaeology of the scheme forfeiture provisions, the administration of the scheme and relevant case law. The judge concluded that, despite not using the word “forfeiture”, 5.11 was a forfeiture clause and so benefit arrears can be extinguished.
While this case does not directly relate to GMP equalisation it does serve to illustrate the importance of the wording of scheme rules when looking back.
While the original Lloyds judgment regarding GMP equalisation closed off the possibility of statutory limitations on arrears under the Limitation Act or the Equality Act, the possibility of scheme rule provisions operating so as to impose a limitation was left open and it seemed that the presence of an operable forfeiture clause may work to limit arrears.
In Lloyds, trustees had discretion as to how to apply such a clause. In contrast, in the CMG case the trustees appear to have no discretion and so arrears beyond six years are automatically forfeit. The CMG case, alongside Lloyds and that of Axminster (see Pensions Bulletin 2021/28), should be borne in mind when considering whether a scheme has a forfeiture clause and, if it does, how it operates.
The Pensions Administration Standards Association has updated its guidance on administration transfer exit agreements following it becoming aware of increasing concerns about the smooth transfer of administration services when trustees wish to change providers. PASA says that these concerns generally fall under the headings of delays, unreasonable charges (or ‘out of scope’ services not made clear at the outset), and deterioration in the service provided during the notice period.
The guidance reviews and reproduces a Code first published in 2018, which sets out a framework intended to enhance the transfer of services between administrators, give clarity to all participants’ responsibilities and accountabilities, and limit the potential for delays. The guidance also contains a template exit agreement which can be used as a schedule to an existing administration contract, a schedule within a new administration contract, or as a checklist for trustees and administrators to check their own exit agreement includes all recommended aspects.