Pensions Matter – June 2014
Print newsletter04/06/2014

Case-Law Round Up
Harvey (PO 1394) Bulk Transfer delay causes financial loss to a member The Deputy Pensions […]
Harvey (PO 1394) Bulk Transfer delay causes financial loss to a member
The Deputy Pensions Ombudsman (DPO) partly upheld a complaint from a member that he suffered financial loss due to his pension fund being transferred outside of a 10 day transfer window, which had been agreed under a bulk transfer. The member was also unhappy that the funds were sent via cheque rather than electronically and complained accordingly.
As mentioned, the DPO partly upheld the complaint; however the DPO held that the respondent’s offer of paying the member’s loss, on the basis that his funds were transferred and invested with the incoming pension provider 7 days after his transfer request was reasonable under the circumstances.
The DPO also held that given the funds were calculated to have been invested the day after the deemed investment date (7 days from the date the claim form was issued) the member had not suffered any additional detriment than if the funds had been transferred electronically.
The member was awarded £275 for the distress and inconvenience caused by the matter.
This determination shows that delays in transfer payments can cause financial loss. Consequently, trustees, employers and their advisors should be mindful of such transfer payments and keep members updated on their progress. This determination also confirms that transfer payments made by cheque are acceptable if the member is treated fairly, i.e. no cheque clearance period. However, we recommend that where possible, payments should be made by electronic means to minimise any possible disputes arising.
Smith (PO-1746) failure to keep accurate member records leads to maladministration
The Pensions Ombudsman (PO) determined that two former scheme administrators together with the trustees of a defined contribution scheme were at fault and equally liable for maladministration as a consequence of failing to secure Mr Smith’s deferred member’s pension benefits upon the scheme being wound up in 2004.
The PO agreed with Mr Smith’s complaint. The issue arose due to the incumbent scheme administrator furnishing the incoming scheme administrator with inaccurate member data that unfortunately showed that (incorrectly) Mr Smith had no funds in the scheme. Furthermore, the new scheme administrator failed to take reasonable steps to audit the records correctly and used Mr Smith’s unidentified funds as part of a surplus to cover employer contributions and scheme expenses.
The PO found that as the trustees were responsible for the winding up of the defined contribution scheme in 2004, the trustees were also ultimately responsible for making sure that all members’ benefits under the scheme had been properly secured.
The determination highlights the importance of improving and maintaining standards of scheme record keeping. Changing scheme administrators is common place and therefore member data needs to be 100 percent accurate to avoid the likelihood of similar mistakes occurring.

Changes to TUPE pension protection requirements
Changes have been made to the statutory protection in regard to pension rights offered to […]
Changes have been made to the statutory protection in regard to pension rights offered to transferring employees on a TUPE transfer, who were members of an occupational pension scheme prior to the TUPE transfer.
The changes came into force on 6 April 2014 and affects transferee employers who wish to use a money purchase or a stakeholder pension scheme in order to satisfy the pension protection requirements of sections 257 and 258 of the Pensions Act 2004 and the Transfer of Employment (Pension Protection) Regulations (SI 2005/649).
The transferee employer will now satisfy the requirements under the amended regulations if:
- where the transferring employee previously paid less than 6% employee contributions, the transferee employer matches that amount. Where the transferor employee paid contributions of 6% or more, the transferee employer need only contribute 6%; or
- where prior to the TUPE transfer, the transferring employer was subject to the requirement to make contributions to an occupational money purchase arrangement (and this was solely for producing money purchase benefits), then following the TUPE transfer, the transferee employer simply has to match the transferor employer contributions.
Point two reflects the update to the regulations. The reason for this change is to avoid employees, after a TUPE transfer, being placed into a more favourable position than they were previously. In particular, where the transferor employer was previously providing only the statutory minimum contribution requirements for auto-enrolment purposes.
Please note that where transferring employees previously participated in a personal pension scheme, the law remains unchanged and the transferee employer will still have to ensure that it pays employer contributions which the transferring employees were contractually entitled to under their previous contracts of employment.

Defectively executed deeds of amendment – Briggs (and Others) v Gleeds (and Others) (High Court)
The High Court held that deeds of amendment going back more than 30 years had […]
The High Court held that deeds of amendment going back more than 30 years had been incorrectly executed. The deeds failed to meet the execution requirements of the Law of Property (Miscellaneous Provisions) Act 1989. In particular, partners’ signatures were not attested by a witness.
The consequences for the pension scheme, as well as the sponsoring employer, are significant. As a result of the defective deeds certain employees who thought they had joined the scheme never in fact became members, whilst other members who thought their benefits had been reduced are now entitled to enhanced benefits.
This case illustrates the importance of ensuring that deeds are correctly executed, taking into account any statutory requirements as well as any requirements under the scheme rules. If trustees or employers are in any doubt about what is required they should seek legal advice, or run the risk of deeds being held to be invalid.

Defined contribution pension reform – DWP confirms charge-capping measures and quality standards
On March 27, the Department for Work and Pensions (DWP) outlined in its “Command Paper: […]
On March 27, the Department for Work and Pensions (DWP) outlined in its “Command Paper: Better workplace pensions: Further measures for savers” new quality standards and charge-capping measures. This will affect those involved with defined contribution (DC) contract and trust-based schemes. The consultation closed on 15 May 2014.
The key proposals include the following changes for DC pension schemes:
- For those running DC schemes from April 2015, there will be a minimum quality standard. The purpose of this is to ensure the people running and implementing such schemes take into account the quality of the scheme and prioritise members’ interests. For trust-based DC schemes, the requirements will be implemented under regulations which will be enforced by the Pensions Regulator. With regard to contract-based schemes, the Financial Conduct Authority (FCA) will oversee the implementation and enforcement of quality standards.
- From April 2015, in order to increase and improve transparency of contract-based DC schemes, providers will have to put in place Independent Governance Committees (IGCs). Their purpose will be to evaluate the value for money that members are getting as well as ensuring compliance with quality standards. The IGCs will be given powers to escalate any concerns to employers, members and the FCA. For trust-based DC schemes, trustees will have to also consider minimum quality standards and report if necessary to the Pensions Regulator.
- A charge cap of 0.75% will be introduced from April 2015 for managed funds. However, this will only apply for the default funds of DC qualifying auto-enrolment schemes. Please note the cap will exclude transaction costs. Qualifying DC auto-enrolment schemes will also not be able to levy consultancy charges against members of such schemes. The cap and charges will be considered again in 2017. There will also be a requirement of disclosure of all pension costs and mandatory charges by the trustees and IGCs. This will be made available to members, employers and regulators.
- The DWP is also looking to explore improving standards of schemes by non legislative means including accreditation or quality marks for well administered DC schemes.
The changes mentioned above will be implemented under the Pensions Act 2014, respective secondary legislation as well as new FCA regulations.

Pensions Regulator investigates trustee record-keeping
Under the Pensions Regulator’s (tPR) 2010 guidance, it identified two categories of data: Common data […]
Under the Pensions Regulator’s (tPR) 2010 guidance, it identified two categories of data:
- Common data – this includes members’ names, national insurance numbers and dates of birth. Since June 2010, tPR expects schemes to record data with 100% accuracy. Common data acquired before June 2010 should be 95% accurate.
- Conditional data – this is data in respect of how benefits are calculated. Conditional data includes pension sharing orders, AVC details and any members’ periods of absence.
TPR has reviewed a sample of 237 DB, DC and hybrid schemes of different sizes. The purpose of the review was to assess whether pension schemes were meeting the above targets for common data, and if not, the reasons for them.
The findings of the review demonstrated that overall out of the 237 schemes reviewed, there was a competent degree of good practice. However, it did bring to light cause for some concerns. For example, of the 237 schemes reviewed only 83% provided tPR with common data scores. Of this 83% only 75% had scores of 95% or above. It was identified that one of the main reasons for the lower scores included a failure to maintain members’ addresses and personal details. Other reasons included: a lack of focus on the accuracy of the data and lack of pro-activeness by the trustees to collect the data until prompted by tPR.
As a result of this review, tPR has implemented seven investigations which could lead to enforcement action being taken by tPR.