Pensions Matter – August 2014
Print newsletter01/08/2014

Employment case law round-up – September 2013
Clift (PO-2066) Trustee time-barred with recovery of overpayments The Deputy Pensions Ombudsman (DPO) has held […]
Clift (PO-2066) Trustee time-barred with recovery of overpayments
The Deputy Pensions Ombudsman (DPO) has held that, in recovering overpayments made incorrectly to a pension member, going back to the late 90s (but only discovered in 2011) the trustees were time barred under statute from seeking recovery of such overpayments.
The DPO held that, in accordance with section 32(1) of the Limitation Act 1980, the trustees should have been able to identify the incorrect overpayments in 1998/99. Consequently, the six year limitation period back to the late 90’s had been exceeded, and trustees were time barred from making a claim.
Important to also note is the DPO only partly upheld the complaint by the member who agreed he had altered his financial position in respect of the incorrect overpayments. The DPO held the member had only changed his financial position based on the lump sum element of the overpayment but not in relation to the incorrect monthly overpayments. The trustees were, therefore, able to recover such overpayments that had been paid in the six years prior to them notifying the member of the error in 2011.
The determination brings to light how easy things can go wrong for trustees when trying to recover overpayments from members. The legislation in respect of limitation periods is complex, especially in respect to pensions where there is a degree of uncertainty about when the limitation period as set out in the Limitations Act 1980 applies. We therefore recommend that you seek legal advice on this issue if the matters similar to this one rise.
Jardine (PO-2465): Ill-health early retirement medical experts need to be more thorough with their examinations
The DPO held that the employer British Telecommunications plc (BT), in response from a member to an application for ill-health early retirement, based its decision on incomplete and insufficient information from a registered medical practitioner (RMP) which resulted in maladministration. The member was refused an ill-health early retirement pension based on the RMP’s opinion that the member’s condition was not permanent, and other treatments were available to treat his condition.
The DPO held that the RMP had reached his findings without procuring vital information regarding the treatments which the member had tried. The RMP also rejected findings from a previous medical report for this member which suggested viable treatments had been exhausted. Furthermore, the RMP failed to provide reasons for why he had rejected the previous report.
As a result, the DPO directed BT to request a new medical report from the RMP and also directed BT to compensate the member for the sum of £250 for the distress and inconvenience caused to the member by BT’s maladministration.
The key points to take away from this determination are that when a medical practitioner advises on a member’s health and incapacity, it is not enough for such practitioner to only raise concerns or highlight possible untried treatments. Instead the medical practitioner must expressly identify them in the medical report for completeness.
In addition, decision makers (employers and trustees) should be conscious of the above when reviewing medical evidence and in making a decision as to whether such a member is eligible for an incapacity pension. If the medical report is vague and indecisive, the decision maker should go back to medical practitioner who produced the report and request clarification prior to making a decision.

Olympic Airlines – PPF entry rules amended
In the Court of Appeal decision of Olympic Airlines SA Pension & Life Insurance Scheme […]
In the Court of Appeal decision of Olympic Airlines SA Pension & Life Insurance Scheme v Olympic Airlines SA in June 2013, the court held that the sponsoring employer, Olympic Airlines SA, had not experienced an insolvency event for the purposes of section 121 of the Pensions Act 2004 and therefore the scheme was not eligible to enter the Pension Protection Fund (PPF).
Consequently, the government decided to review the rules on entry into the PPF and amendments are now being made to the Pension Protection Fund (Entry Rules) Regulations 2005 to hopefully ensure the Olympic scheme will now be able to transfer to the PPF following its insolvency event.
The amendments will apply only until 2017. The changes in legislation will create a new type of insolvency event under section 121(5) of the Pensions Act 2004 known as a “European insolvency event” and will be triggered if:
- the scheme’s sponsoring employer was, on 20 July 2014, subject to insolvency action in a European Economic Area (EEA) state other than the UK;
- the scheme employer has its main centre of interests in that EEA state;
- a winding-up order in respect of the scheme employer was granted by a UK court, but was set aside due to lack of jurisdiction to wind up a non-UK Company; and
- a PPF assessment period under normal circumstances would be triggered, were it not for the winding-up order being set aside due to the lack of jurisdiction.
Following the Court of Appeal decision, the trustees of the Olympic scheme have been granted permission to appeal to the Supreme Court. Given the above amendments to the relevant legislation, we assume they will now look to take advantage of this legislation rather than proceeding with the appeal in the Supreme Court. However, this point has not been confirmed at the time of writing this article.

Queen’s Speech
Included in the Queen’s Speech on 4 June were announcements of two new pension bills: […]
Included in the Queen’s Speech on 4 June were announcements of two new pension bills: the Private Pensions Bill and the Pensions Tax Bill.
A brief summary of each bill is set out below:
The Private Pensions Bill
The Private Pensions Bill will establish three definitions for scheme types. They will be: defined ambition, defined benefit (DB) and defined contribution (DC).
As yet, it is not clear how this will dove-tail with the statutory definition of a “money purchase scheme” which is about to be amended to take account of the revised definition of “money purchase benefits” as set out in the Pensions Act 2011. We will keep you updated on this.
The Private Pensions Bill will also facilitate the creation of collective defined contribution (CDC) schemes. CDC schemes are designed to pool members’ funds and mitigate the investment risk between other members. The announcement of the creation of CDC schemes has, on the whole been received positively from the pensions industry.
The Private Pensions Bill, subject to the HM Treasury consultation, may also bring forward legislation to prohibit transfers from all private sector DB schemes.
The Pensions Tax Bill
The Pensions Tax Bill will introduce a tax framework to allow individuals aged 55 or over to be able to access their defined contribution pot; subject to paying the additional marginal tax rate.

tPR issues warning over scheme data, or lack of!
Following on from our earlier article on this topic, results from the Pensions Regulator’s (tPR) […]
Following on from our earlier article on this topic, results from the Pensions Regulator’s (tPR) fifth annual record-keeping survey has unfortunately brought to light a decline in the rate at which occupational pension schemes are putting in place processes to measure their data, with figures almost identical to the previous annual survey. The proportion of schemes who are still not formally measuring conditional data continues to be high with 42% of schemes failing in 2014 in contrast to 46% in 2013.
However, there is some good news! The survey has indicated a continuing trend of better record keeping by the larger pension schemes. For example, 64% of large schemes hit tPR’s common data target in contrast to only 33% of small schemes. No doubt one contributing factor is due to the greater resources available.
Reasons highlighted by the survey for failing to measure common data include: the task being perceived as not relevant, schemes not having enough time and resources and the exercise not being seen as a priority by the scheme.
tPR is concerned about schemes’ attitude towards measuring common data, especially given the upcoming pension reforms which will involve the end of DB contracting out in 2016 together with the introduction of automatic transfers. As a result, accurate member data will be required and, therefore, there is a real need for trustees and scheme employers to work more closely with the scheme’s administrators and professional advisers to improve data compliance moving forward.
In regard to enforcement, there are currently 11 investigations being carried out by tPR. tPR has stressed that it won’t be toothless, and will take measures to improve schemes’ record-keeping standards, together with publicly reporting on the outcomes of the investigations.

Update to the way the PPF calculates the risk-based levy
On 29 May 2014, the Pension Protection Fund (PPF) published “Consultation on the second PPF […]
On 29 May 2014, the Pension Protection Fund (PPF) published “Consultation on the second PPF Levy Triennium – 2015/16 to 2017/18”. The purpose of the consultation document is to set out the PPF plans in respect of the levy for the next three years from 2015/16. The consultation is due to close on 9 July.
One of the proposals in the consultation is to change the way in which the PPF calculates the risk-based levy. The consultation document sets out a new “PPF-specific” system of risk scoring; which could significantly affect the scheme’s risk-based levy. The proposals foresee a system of scorecards to segregate different types of organisations based on their insolvency risk. There will also be a separate scorecard for not-for-profit organisations.
The scorecards will create bands (akin to council tax bands) with a levy rate assigned to each band. Under the proposed new scorecard system, the PPF believes the aggregate levy will change by approximately £200 million. It is also believed that, while most schemes should hope to see a reduced levy, more than 600 schemes will see an increase in their levy invoice by more than £50,000.
In addition, the PPF has proposed substantial changes in the way schemes look to reduce and manage their levy. For example, private/group company guarantees will require trustee sign off that the guarantor is able to meet the amount stated under such guarantee and asset backed contribution vehicles (excluding property) will be discounted going forward.