OPDU Report 26 October 2009

Bulletin Board
Some Key Issues for Trustees

2009 has been another busy year for those involved with occupational pension schemes and 2010 looks as if it will continue in the same manner. Here are just a few of the current issues:

Legal (1) (Age Discrimination)

Following the ECJ ruling, the High Court decided that the UK Government is able to justify having a default retirement age of 65 for now. The Government has brought forward its review of the default retirement age to 2010 and we await future developments. On a similar subject…

Legal (2) (Flexible Retirement)

DWP guidance is awaited on the interaction between flexible retirement and age discrimination regulations. Draft regulations contained two possible exemptions and this area is likely to require careful monitoring.

Legal (3) (Equalisation)

In the Foster Wheeler case, the Court of Appeal set out some guiding principles including the principle of “minimum interference” where schemes need to be amended to equalise benefits. The area of equalisation and whether schemes properly meet the requirements is a complex one and a potential source of claims against trustees. A review of claims experience in the last year is provided.

(See Claims Report )

Governance (1) (Defined Contribution)

With more schemes closing to new entrants and future accrual and with defined contribution increasingly in the mainstream of private sector pension provision, there is greater focus on the governance of such schemes. Tony Hobman of the Pensions Regulator highlights some key areas in this article.

Governance (2) (Record Keeping)

Almost a year on from the Pension Regulator’s guidance on good record keeping, data management is a key issue for trustees to consider. (John Broker from ITM, a data management specialist, sets out his thoughts here).

Governance (3) (Knowledge)

The second issue of the draft Code of Practice on Trustee Knowledge and Understanding stresses the importance of bespoke trustee training, thereby providing a reference point for trustees reviewing their training requirements for the next few months.

Scheme Design (Higher Earners)

The 2009 budget announced the reduction in tax relief on pension contributions from April 2011 for those earning £150,000 or over. The Government will consult on how the new restrictions will apply to defined benefit pension schemes. With anti forestalling legislation already in place, how will schemes be affected and will this further distance company decision makers from pension provision?

Communication (1) (Minimum Pension Age)

We’ve known for a long time that from April 2010 the normal minimum pension age will generally increase from 50 to 55. A final reminder to scheme members may well be appropriate.

Communication (2) (Deregulatory review)

The introduction of principles based disclosure legislation is scheduled for 2010 and the DWP has published a consultation document asking for the regulations to be simplified. The out-come of this is awaited with interest.

Investment

There is no shortage of issues to consider. For defined benefits schemes, matching the assets more closely to the liabilities has been a consideration for some time. Two areas of interest are considered; buy-ins by Mark Howard and Kathryn Breslin of Barlow Lyde and Gilbert  ….  and liability driven investments by Andrew Welch from Insight Investment.

Not to Mention…

Personal Accounts, PPF levies, changes to employer debt regulations, state pension reforms, default funds and decumulation, to name but a few.