Some Key Issues for Trustees

This is the second bulletin board of 2011 and these are just a number of issues currently testing trustees.

Bribery Act 2010

The Bribery Act 2010 became effective from 1 July 2011 and trustees should be considering what action they may now need to take. This could include the development of a hospitality policy and hospitality register if one does not already exist, together with further procedures and controls depending upon the trustee constitution and advice received.

Scheme Administration Standards

The Pensions Regulator has been highlighting the importance of administration in enabling good outcomes from pension saving. In a recent determination, the deputy Pensions Ombudsman upheld a complaint of undue delay in processing a transfer. In reaching a decision, the deputy Pensions Ombudsman stated that “it should take no longer than five working days to raise and issue a transfer value cheque”. This acts as a timely reminder to review Scheme administration standards.

State Pension Age

Trustees are reminded that State Pension Age is still due to be equalised at age 65 from November 2018 and will then increase to age 66 from 2020.

Automatic Enrolment

If their Scheme is likely to be affected by automatic enrolment, trustees should be aware of the date from which this is likely to be applicable for the company. They should begin preparation to tackle issues associated with the implementation, admini-stration and communication of these changes.

Finance Act 2011 (1)
Scheme Pays

Following changes to the Annual Allowance, trustees are now engaging with their administrators to agree how, in practice, benefits will be abated so that an Annual Allowance charge can be paid by the Scheme.

Finance Act 2011 (2)
Lifetime Allowance

With the Lifetime Allowance due to reduce from £1.8 million to £1.5 million from 6 April 2012, what further communication is required to Scheme members?

Finance Act 2011 (3)
Annuity or Drawdown?

Now that members are no longer required to take benefits at age 75, trustees and companies may wish to consider whether to allow members in defined contribution schemes or sections, to take advantage of new drawdown and flexible drawdown pension provisions.

Finance Act 2011 (4)
Rule Amendments

With the changes brought about by the Act, is there a need for rule amend-ments? These might be required, for example, to take advantage of max-imum trivial lump sum commutations.

Solvency II

Solvency II is due to come into force in January 2013 and whilst there is no direct application to pensions, capital requirements for long term insurance products such as annuities and pension buy-outs are increasing, with a consequential impact on costs. Trustees and companies would be advised to keep an eye on developments and whether there are any more significant implications for pension schemes in the longer term.

Employer Debt

Trustees should acquaint themselves with the Department for Work and Pensions proposals for easements in the event of a company not wanting to make a debt payment (calculated on a buy out basis).

Pension Unlocking Schemes

We’ve seen these before. The Financial Services Authority (FSA) have warned about unlocking schemes designed to provide members with access to funds before they reach age 55, in this case by transferring funds to a corporate bond and then facilitating a loan to the member. Whilst trustees are usually not authorised or able to give individual financial advice, they may wish to provide a copy of the FSA’s note if they become aware of this being considered by a member.

And that’s not all…

There’s plenty else going on including, longevity swaps, enhanced transfer value exercises, investment reviews against a background of volatile markets, considering the introduction of investment risk when calculating PPF levies, and the introduction of NEST Corporation to name just a few.

 

Claims

Some typical examples of the subject matter of claims in which OPDU has been involved:

• Incorrect formulas used for calculating benefits
• Interpretation of Trust Deeds
• Overpayment of Benefits
• Misapplication of Scheme Rules
• Seeking Court Directions
• Early retirement & ill-health disputes
• Rectification proceedings
• Accounting irregularities
• DC choices of investment funds
• Pension Sharing Orders
• General administration errors
• TUPE issues
• Misrepresentations by trustees
• Transfer Values
• Incorrect quotations
• Discrepancies between scheme documentation and administration practice
• Delays in the transfer and payment of benefit assets
• PPF levy issues

The issues have involved individual claim sums ranging up to £20m.