Pensions law 2011: implementing radical tax changes

Key points

• The principal legislation affecting pensions during 2011 was the Finance Act 2011. It reduced the annual allowance for pension savings to £50,000, removed the need to purchase an annuity by age 75 and eased the income drawdown rules.
• The Pensions Act 2011 introduced a number of modifications to the planned auto-enrolment regime, to ensure that it works smoothly.
• Regulations removing the default retirement age were made during 2011.
• A judicial review of the Government's decision to use the consumer prices index rather than the retail prices index for public service schemes concluded that the change was permissible.
• The European Court of Justice's Test-Achats ruling effectively outlawed the use of sex-based actuarial factors in setting annuity rates.
• International Accounting Standard 19 on pensions costs was revised and is likely to have an adverse effect on the profits of UK companies.
• The PPF announced how it expects GMPs for men and women to be equalised.

Box 1: Selective list of statutory and regulatory developments in 2011 concerning pensions

Main statutes that received royal assent in 2011

• Armed Forces Act 2011: provides for armed forces pensions to be increased in deferment in line with the CPI rather than the RPI.
• Finance Act 2011: includes reductions in the lifetime and annual allowances; the removal of the requirement to purchase an annuity at age 75; and revised income drawdown provisions.
• National Insurance Contributions Act 2011: provides for an increase in the rates of NI contributions paid by employees, employers and the self-employed from 6.4.11 by one percentage point, and also provides for a regional employer NI contributions holiday for new businesses.
• Pensions Act 2011: introduces changes to the auto-enrolment regime reflecting the recommendations of an independent review; allows the use of the CPI for certain pension increase purposes; brings forward to 2018 the increase in the female state pension age to 65; increases the state pension age to 66 for everyone by 2020; and makes some amendments in respect of the PPF and the repayment of surplus to employers.
• Postal Services Act 2011: among other matters, provides for the transfer of Royal Mail's historic pension deficit to the Government. In particular, it establishes a new statutory scheme to provide benefits to certain members of the existing Royal Mail Pension Plan.

Main pension Regulations made in 2011 (excluding all concerning statutory occupational schemes)

• Occupational Pension Schemes (Levy Ceiling - Earnings Percentage Increase) Order 2011 (SI 2011/169): specifies that the earnings percentage used by the PPF to increase the maximum amount of levy that it can charge to eligible pension schemes is 2.4%, based on the increase in earnings during the 12 months commencing on 1.8.09.
• Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2011 (SI 2011/301): reduce the personal information requirements that a scheme administrator has to provide to HMRC so that only an individual's NI number is needed in most instances and also amends the information required in respect of unauthorised payments.
• Registered Pension Schemes (Accounting and Assessment) (Amendment) Regulations 2011 (SI 2011/302): change the personal particulars that a scheme administrator is required to include on HMRC returns of income tax liability submitted after 6.4.11 so that usually only an individual's NI number is required.
• Social Security Revaluation of Earnings Factors Order 2011 (SI 2011/475): sets the earnings factor revaluation percentage for the calculation of the state second pension and guaranteed minimum pension in certain circumstances for the tax year 2010/11 at 2.3%, and increases the revaluation percentages for earlier tax years accordingly.
• Social Security Pensions (Low Earnings Threshold) Order 2011 (SI 2011/477): sets the low earnings threshold for the purposes of calculating the state second pension for the tax year 2011/12 at £14,400, an increase of 2.3% over the previous year's threshold.
• Pension Protection Fund (Revaluation Amendments) Regulations 2011 (SI 2011/554): provide for compensation paid by the PPF to be increased in line with CPI rather than RPI.
• Social Security (Deferral of Retirement Pensions) Regulations 2011 (SI 2011/634): provide that an individual does not accrue deferred state pension while in receipt of certain other state benefits, including state pension credit.
• Pension Protection Fund (Prescribed Payments and Investment Costs - Amendment) Regulations 2011 (SI 2011/671): allow for certain costs in relation to the recovery and subsequent investment of debts due to the PPF to be met out of the fund rather than the administration levy.
• Application of Pension Legislation to the National Employment Savings Trust Corporation Regulations 2011 (SI 2011/673): extend certain legislation that applies to pension scheme trustees to the Nest Corporation with certain modifications in respect of disclosure, accounts and investment.
• Finance Act 2009, Schedules 55 and 56 (Income Tax Self Assessment and Pension Schemes) (Appointed Days and Consequential and Savings Provisions) Order 2011 (SI 2011/702): appoints 1.4.11 as the commencement date for the penalty regime for the failure of an administrator of a registered pension scheme to make returns to HMRC of the income tax for which the scheme administrator is liable.
• Finance (No.3) Act 2010, Schedules 10 and 11 (Income Tax Self Assessment and Pension Schemes) (Appointed Days) Order 2011 (SI 2011/703): clarifies certain aspects of the late-filing penalty regime and provides that these clarifications will apply to pension scheme returns for periods ending on or after 31.3.11.
• Pension Protection Fund (Pensions on Divorce etc: Charges) Regulations 2011 (SI 2011/726): set out the circumstances in which costs may be recovered by the PPF from the parties to a pension-sharing or attachment order where the order was made before the relevant scheme entered the PPF, and establish the level of costs that may be charged together with the methods for recovering the costs.
• Pension Protection Fund (Pension Compensation Sharing and Attachment on Divorce etc) Regulations 2011 (SI 2011/731): implement the provisions of the Pensions Act 2008 that permit courts to make pension-sharing and attachment orders on divorce, annulment and dissolution of a civil partnership in respect of PPF compensation.
• Taxation of Pension Schemes (Transitional Provisions) (Amendment) Order 2011 (SI 201/732): provides that where an individual is entitled to either a tax-free lump sum from their pension scheme of more than 25% of their fund's value or a protected pension age, scheme administrators have up to six months to arrange for payment of the associated benefits, and contains transitional provisions in respect of individuals aged between 50 and 54 who are entitled to draw their pension before age 55 and who change provider.
• Registered Pension Schemes (Transfer of Sums and Assets) (Amendment) Regulations 2011 (SI 2011/733): supplement SI 2011/732 (see above) by removing an unintended tax charge where a person aged between 50 and 54 who started drawing a pension before 6.4.10 changes their pension provider after this date but before they are 65.
• Divorce and Dissolution etc (Pension Protection Fund) Regulations 2011 (SI 2011/780): make further provision concerning pension-sharing and attachment orders when they are made in respect of schemes that have entered the PPF and cover the approach to changes affecting orders or periods of suspension of sharing orders to allow for the possibility of appeal.
• Social Security Benefits Up-rating Order 2011 (SI 2011/821): makes provision for the increases to be made from April 2011 to a wide range of state benefits including increasing the basic state pension by 4.6% from £97.65 to £102.15 per week and the standard minimum guarantee credit from £132.60 to £137.35 per week.
• Financial Assistance Scheme (Revaluation and Indexation Amendments) Regulations (SI 2011/839): amend the provisions governing the FAS to allow, among other matters, for any revaluation of benefits after 31.3.11 and indexation of assistance payments made after 1.1.12 to be in line with the CPI.
• Pension Protection Fund (Pension Compensation Cap) Order 2011 (SI 2011/840): increases the compensation cap for the purposes of determining the compensation payable from the PPF in line with increases in the general level of earnings to £33,219.36 per year.
• Occupational Person Schemes (Levy Ceiling) Order 2011 (SI 2011/841): sets the PPF levy ceiling for the financial year commencing on 1.4.11 at £892,092,092.
• Social Security (Contributions) (Re-rating) Order 2011 (SI 2011/938): increases the rates of class 2 and class 3 NI contributions from £2.40 to £2.50 and from £12.05 to £12.60 respectively, and also amends the thresholds for class 2 and class 4 contributions.
• Social Security (Contributions) (Amendment No.2) Regulations 2011 (SI 2011/940): among other matters, with effect from 6.4.11, set the lower and upper earnings limits for primary class 1 NI contributions at £102 and £817 per week, and the primary and secondary thresholds for class 1 NI contributions at £139 and £136 per week.
• Social Security (Reduced Rates of Class 1 Contributions, Rebates and Minimum Contributions) Order 2011 (SI 201/1036): specifies the revised rebate rates for NI contributions which apply to members of contracted-out occupational schemes from April 2012 following a review of rebates.
• Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 (SI 2011/1069): abolish the default retirement age of 65 with effect from 6.4.11, detail the transitional arrangements and deal with other consequential issues.
• Pensions Act 2007 (Abolition of Contracting-out for Defined Contribution Pension Schemes) (Consequential Amendments) Regulations (SI 2011/1245): contain a number of consequential amendments following the abolition of contracting out for DC schemes, including a requirement that DC schemes must inform affected members that they are no longer contracted out and explain the effect on their benefits; permit transfers to be made from DB schemes to other types of arrangement provided certain safeguards are met; and also provide for a three-year transitional period in respect of the NI rebate due to schemes from HMRC in respect of contracting out in previous years.
• Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) Order 2011 (SI 2011/1246): makes a number of consequential amendments resulting from the abolition of contracting out on a DC basis; amends the disclosure of information requirements that schemes must comply with in relation to their contracted-out status; and includes transitional provisions that apply for the three years after abolition.
• Pensions Act 2008 (Commencement No.10) Order 2011 (SI 2011/1266): brings into force with effect from 6.4.12 the provisions of the Pensions Act 2008 that provide for the removal of special provisions applying to the protected rights of pension schemes.
• Pensions Act 2007 (Commencement No.4) Order 2011 (SI 2011/1267): with effect from 6.4.12, brings into force the provisions of the Pensions Act 2007 that abolish contracting out of the state additional pension for DC schemes.
• Occupational Pension Schemes (Contracting-out) Amendment Regulations 2011 (SI 2011/1294): enshrine in legislation the main points of the information contained within actuarial Guidance Note GN28: Retirement benefit schemes - adequacy of benefits for contracting out, which sets out the practical considerations that an actuary must take into account when deciding whether a salary-related contracted-out occupational scheme meets the statutory requirement for contracting out.
• Taxation of Equitable Life (Payments) Order 2011 (SI 2011/1502): provides for payments to people adversely affected by maladministration in the regulation of Equitable Life prior to December 2001 to be disregarded for the purposes of tax and tax credits.
• Pensions Act 2007 (Abolition of Contracting-out for Defined Contribution Pension Schemes) (Consequential Amendments) (No.2) Regulations 2011 (SI 2011/1724): make consequential amendments to primary legislation following the abolition of contracting out by DC schemes.
• Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No.2) Order 2011 (SI 2011/1730): in addition to making consequential amendments to primary legislation resulting from the abolition of contracting out on a DC basis, provides for transitional arrangements for three years after the change, including allowing HMRC to set a minimum level below which it will not pay an age-related payment or minimum contribution to an individual because of the administrative costs involved, and provides for all age-related and minimum contribution payments to be made to individuals.
• Registered Pension Schemes (Lifetime Allowance Transitional Protection) Regulations 2011 (SI 2011/1752): provide that individuals may rely on a new form of transitional protection to reduce or eliminate any potential lifetime allowance charge when the allowance is reduced in April 2012.
• Taxation of Pension Schemes (Transitional Provisions) (Amendment) (No.2) Order 2011 (SI 2011/1782): ensures that commencement lump sums protected under the Finance Act 2004 are not smaller as a result of the reduction in the lifetime allowance and removes the maximum age limit of 75 for taking advantage of the trivial commutation rules.
• Registered Pension Schemes (Relevant Income) Regulations 2011 (SI 2011/1783): set out details of payments that do not count as income for the purposes of meeting the minimum income requirements under the new flexible drawdown rules.
• Registered Pension Schemes (Transfer of Sums and Assets) (Amendment) (No.2) Regulations 2011 (SI 2011/1790): ensure that specified transfers from one drawdown arrangement to another are valid.
• Registered Pension Schemes (Modification of Scheme Rules) Regulations 2011 (SI 2011/1791): provide that, where a registered pension scheme meets an annual allowance charge on behalf of a member (under the so-called "scheme pays" arrangement), any rules of the scheme that prevent this are modified to allow the adjustment to the member's pension.
• Registered Pension Schemes (Prescribed Requirements of Flexible Drawdown Declaration) Regulations 2011 (SI 2011/1792): set out details of the declaration that must be made by a scheme member or a dependant before a scheme can make flexible drawdown payments.
• Registered Pension Schemes (Notice of Joint Liability for the Annual Allowance Charge) Regulations 2011 (SI 2011/1793): set out the details that a member must give to a scheme if the member wants the scheme to meet the annual allowance charge by adjusting the member's pension.
• Registered Pension Schemes (Provision of Information) (Amendment) (No.2) Regulations (SI 2011/1797): require schemes to tell members automatically if they will exceed the reduced annual allowance, require sponsoring employers of DB schemes to provide specified information to scheme administrators and set out information that members who have opted for fixed protection must give to schemes and that schemes must give to HMRC.
• Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc) (Amendment) Regulations 2011 (SI 2011/1801): remove a statutory barrier preventing schemes from reducing a member's benefits so as to meet an annual allowance charge on behalf of the member.
• Employment Income Provided Through Third Parties (Excluded Relevant Steps) Regulations 2011 (SI 2011/2696): provide that the rules that apply in certain circumstances when employers and employees enter into arrangements that result in the payment of money or the transfer of assets by a third party ("disguised remuneration"), and that create a tax charge where certain "relevant steps" occur, will not apply where the subject of the relevant step is a transfer of assets or payment of money from a non-UK tax-relieved fund, or is a transfer from a relevant non-UK scheme. They also exclude from the disguised remuneration rules payments made by registered pension schemes that are subject to the unauthorised payments charge.
• Occupational Pensions (Revaluation) Order 2011 (SI 2011/2867): sets out the revaluation percentages that apply from 1.1.12 to benefits in excess of the guaranteed minimum pension under DB occupational pension schemes for individuals who left their scheme on or after 1.1.86 with entitlement to a deferred benefit and who will reach their schemes' normal pension age during 2012.

Main Pensions Regulator guidance issued in 2011

• Member record-keeping: What trustees can expect from statutory auditors: a statement and guidance for trustees to help them understand the extent and limits of the auditor's work in a statutory scheme audit.
• Identifying your statutory employer: a statement encouraging trustees of DB schemes to ascertain who the statutory employer is and advising that from November 2011 schemes need to include this information on a scheme return to the regulator.
• The role of trustees in DC schemes - statement by the Pensions Regulator: a statement for trustees to clarify the key differences between DB and DC schemes and to highlight shortcomings in DC scheme governance in an effort to encourage higher standards.
• Understanding and managing your hybrid scheme: a statement for trustees of hybrid schemes and their advisers to help them understand and mitigate the risks that can arise under hybrid schemes.

Main HM Revenue and Customs guidance of relevance to pensions issued in 2011

• Overseas pension schemes: guidance for UK taxpayers who are members of overseas pension schemes but who obtain the benefit of UK tax relief on contributions, explaining annual allowance issues that may arise on and after 6.4.11.
• Contracted-out guidance booklets: updated versions of CA14C: Contracted-out guidance for salary-related pension schemes and CA14E: Contracted-out guidance for mixed-benefit pension schemes and mixed-benefit overseas schemes to take account of Regulations that transferred into legislation with effect from 1.10.11 the requirements of actuarial guidance note GN28: Retirement benefit schemes - adequacy of benefits for contracting out.
• Employment income provided through third parties: updated version of the Employment income manual reflecting the provisions of the Finance Act 2011 relating to the taxation of "disguised remuneration", which is a "reward" provided by employers to their employees through third parties, including trusts, in a manner that may avoid tax.
• Employer asset-backed pension contributions: a detailed note on the revised rules relating to the use of asset-backed contribution arrangements, effective from 29.11.11.
• Notice 700/17: Funded pension schemes: Notice 700/17 (November 2011) provides VAT guidance for employers and trustees on claiming input tax on expenditure by funded pension schemes.
• RPSM06108010 - Technical pages: Annual allowance: From 6 April 2011: Calculating the tax charge: Carry forward: following a review of its interpretation of how the carry-forward rules work for the reduced annual allowance for the transitional years of 2008/09, 2009/10 and 2010/11, the section of the Registered pension scheme manual (RPSM06108010) has been extensively revised in relation to the transitional arrangements.

Main actuarial guidance on pensions issued by the Board for Actuarial Standards in 2011

• Transformations Technical Actuarial Standard: a generic Technical Actuarial Standard, version 1, on pension and insurance transformations completed on or after 1.10.11, which covers the situation where an insurer or pension scheme sponsor seeks to change benefits without having to obtain members' or policyholders' consents, for example on a bulk transfer.
• TM1: Statutory money-purchase illustrations: version 1.4 of TM1, effective from 8.2.11, which reflects the changes to the disclosure of information requirements.

Main guidance issued by the Pension Protection Fund in 2011 (including about the financial assistance scheme)

• Overfunded schemes: Applications for reconsideration and closed scheme authorisation: guidance for scheme trustees in respect of making an application for reconsideration and/or an application for closed-scheme status where the scheme is unable to obtain a full buyout quotation and the scheme's entry valuation shows it is fully funded in respect of PPF liabilities, so that the PPF is not required to assume responsibility for the scheme.
• Guidance on assumptions to use when undertaking a valuation in accordance with s.143 of the Pensions Act 2004; Guidance on assumptions to use when undertaking a valuation in accordance with s.179 of the Pensions Act 2004: updated guidance on the assumptions to be used when undertaking valuations under s.143 of the Pensions Act 2004 (to assess whether a scheme is sufficiently poorly funded to qualify for the PPF) and under s.179 of the Act (in order to assess its funding for purposes of the PPF levy calculation), specifically reducing the discount rate to be used and increasing the assumptions for future male longevity.
• Guidance for calculating and certifying block transfers: 2011/12 levy year: guidance for calculating and certifying "block transfers" (bulk transfers to a single receiving scheme) for 2011/12, which includes the relevant qualification and submission documents. This process ensures liabilities that are transferred between schemes are included in the levies for one of the schemes and allows schemes to have transfers recognised in their levies.
• Statement on equalisation of GMPs and the application of a statutory minimum to PPF compensation for schemes in a PPF assessment period: lengthy guidance for schemes that are in the PPF assessment period explaining the approach that the PPF intends to adopt to calculate PPF compensation that reflects the equalisation of guaranteed minimum pensions and other legislative changes applicable to contracted-out pension schemes.
• Guidance in respect of revaluation of Pension Protection Fund (PPF) compensation: guidance for schemes in the assessment period explaining how the change in the revaluation measure for pensions from the RPI to the CPI affects their schemes and how the revaluation should be calculated.
• Missing beneficiary insurance for FAS annuitising schemes: advice for trustees of schemes eligible for the FAS, informing them that it is not considered appropriate in most circumstances for trustees to spend scheme assets on insurance to cover them for missing beneficiaries.

Main guidance of relevance to pensions issued by the Department for Work and Pensions in 2011

• Guidance for offering a default option for defined-contribution automatic enrolment pension schemes: guidance on the broad principles to be followed when designing default options for both occupational and workplace personal pension DC arrangements to be used for the purposes of automatic enrolment.

Main guidance of relevance to pensions issued by the International Accounting Standards Board in 2011

• International Accounting Standard 19: Employee benefits: amended standard governing the disclosure of pension costs in company accounts. In particular, it removes the option to defer the recognition of actuarial gains and losses, revises the presentation of changes in the value of the assets and liabilities and increases the disclosure requirements. It will apply to financial years beginning on or after 1.1.13.

Main guidance of relevance to pensions issued by the Accounting Standards Board in 2011

• UITF Abstract 48: Accounting implications of the replacement of the retail prices index with the consumer prices index for retirement benefits: issued by the Urgent Issues Task Force on the accounting treatment of the change from using RPI to CPI for revaluation.

Main guidance of relevance to pensions issued by the Auditing Practices Board in 2011

• Practice Note 15: Audit of occupational pension schemes in the United Kingdom (revised): a revised version of PN15, which reflects new international standards governing the auditing of pension schemes and recent changes.

Guidance published by the Institute and Faculty of Actuaries in 2011

• Duties and responsibilities of pensions actuaries: the Professional Regulation Executive Committee of the Institute and Faculty of Actuaries has issued Actuarial Professional Standard APS P1, v.1.0, effective from 1.4.11, which sets out the ethical obligations that apply in addition to the Actuaries' Code for members working for trustees or other governing bodies of pension schemes and for those working for decision-making bodies in relation to public sector schemes. It covers relevant knowledge and skills, practising certificates, obligations relating to appointment, replacement and absence, and other responsibilities, and gives details of the matters to be covered in written agreements with trustees.
• Compliance reviews - pensions: the Professional Regulation Executive Committee of the Institute and Faculty of Actuaries has issued Actuarial Professional Standard APS P2, v.1.0, effective from 1.4.11, which sets out the circumstances in which scheme actuaries are required to seek a review of their written work and the requirements governing the conduct of such reviews.

Box 2: Selective summary of court and tribunal rulings in 2011 (or late 2010) concerning pensions: in alphabetical order

• Gender-based actuarial rates in contravention of EU law
  Association belge des Consommateurs Test-Achats ASBL, Case C-236/09, European Court of Justice, 1.3.11
  The court held that the derogation in Directive 2004/114/EC (which covers equal treatment of men and women in respect of the supply of goods and services) whereby insurers are able to use gender-based actuarial factors when calculating the rates for annuities and other products was contrary to the EU's Charter of Fundamental Rights.
• Retirement notice inadequate
  Bailey v R&R Plant (Peterborough) Ltd, Employment Appeal Tribunal, 18.5.11.
  Mr Bailey's employment terminated on his 65th birthday. He made a request to stay in work after this age but his employer advised him that it was company policy to retire people at 65 and that the best it could offer was some part-time work. This was not acceptable to Mr Bailey and he left on his birthday. The employment tribunal rejected his unfair dismissal claim on the basis that the employer had complied with the requirements of the Age Equality Regulations 2006 by giving him six months' notice before his normal retirement age that he would have to retire. It found that the claimant's request to stay on in work was defective because it did not state that it was made under the Regulations. On appeal, the Employment Appeal Tribunal held that Mr Bailey would only have known that his letter should have referred to the relevant section of the Regulations if his employer had informed him of it in its notice. Therefore the employer's notice was incorrect and Mr Bailey's claim for unfair dismissal on account of retirement was upheld.
• Deputy Pensions Ombudsman's decision correct in law
  Batt v Royal Mail, High Court, Chancery Division [2011] EWHC 900 (Ch)
  Mr Batt brought an action challenging the decision of the Deputy Pensions Ombudsman that Royal Mail had not been guilty of maladministration when it decided not to award him an ill-health pension, even though his employment was terminated on the grounds of ill health and he was awarded a lump-sum payment. She had found that the employer was entitled to depend on the advice of its own medical advisers where it was in conflict with that of an independent medical board. The court held that there was nothing in the employee's arguments to suggest any error of law on the part of the deputy ombudsman in reaching her decision.
• FSDs' "super" priority status confirmed
  Bloom v Pensions Regulator, Court of Appeal [2011] EWCA Civ 1124
  The administrators of the Nortel Network companies and the Lehman Brothers group appealed against the decision of the High Court that financial support directions issued by the Pensions Regulator after a company has entered into formal insolvency procedures should be treated as an expense of the administration of the insolvent companies, and therefore rank above other debts on insolvency. The Court of Appeal upheld the ruling.
• Action on contribution notice can continue
  Bonas Group Pension Scheme, Re, Upper Tribunal, Tax and Chancery Division [2011] UKUT B3 (FS)
  A Belgian company, Michel Van de Wiele NV (VDW), sought to bar the Pensions Regulator from pursuing certain allegations made when the latter issued VDW with a contribution notice. After a thorough examination of the regulator's powers, the court ruled that VDW had behaved in a manner that brought its actions within the scope of the Pensions Act 2004, which governs contribution notices, so the substantive action could proceed.
• Pension scheme debts rank above preference shares
  Burton (liquidator of Ben Line Steamers Ltd), Court of Session, Outer House [2010] CSOH 174
  A question arose between the Merchant Navy Officers' Pension Fund (MNOPF) and the liquidator of a shipping company that had employed a substantial number of merchant navy officers who were members of the fund. Once other debts had been cleared £9 million would remain, which the liquidator could use to pay banks who were holders of preference shares. However, the MNOPF submitted a claim for more than £20 million, which it calculated was the company's share of the fund's deficit. The liquidator asked for directions concerning the extent to which MNOPF was entitled to receive monies before the banks. The court held that the company's share of the fund's deficit was admissible in the winding up because it was a contingent liability at the date of winding up. Therefore its claim ranked before those of the holders of preference shares.
• Equalisation amendments not valid
  Capita ATL Pension Trustees Ltd v Gellately, High Court, Chancery Division [2011] EWHC 485 (Ch)
  The Sea Containers Pension Scheme 1990 was administered from 1991 on the basis that the normal retirement date for men and women had been equalised. However, the deed effecting this change and subsequent amendments introduced in 1995 was not executed until 2003. The court held that the purported 1991 equalisation was not valid and there were no grounds for departing from the provisions in the rule requiring the formality of a deed for its exercise.
• Opt-out principle compatible with EU law
  Copple v Littlewoods plc, Court of Appeal [2011] EWCA Civ 1281
  The claimants were female part-time workers who had been excluded from their employer's pension schemes. Some of the workers joined the schemes when the barrier to entry was lifted. The employees sought declarations allowing them retrospective entry to the schemes. The Employment Appeal Tribunal found that the declarations should not cover those part-timers who would have opted not to join the scheme had membership been offered to them, and that those who would have joined the scheme were not entitled to a declaration extending to the period after the barrier to entry was lifted. The Court of Appeal turned down the claimants' appeal on the grounds that the opt-out principle was in accordance with EU law.
• Compensation not limited by retirement date
  Freeman v Ultra Green Group Ltd (in creditors' voluntary liquidation), Employment Appeal Tribunal, 9.8.11
  On paper, Mr Freeman's employer had a retirement policy that recognised the state retirement age; however, no steps were taken prior to his 65th birthday to retire him. After he expressed his concern about how he was being asked to do his work, the employer instituted a procedure to dismiss him by retirement. He resigned before the date set for his retirement. The Employment Appeal Tribunal (EAT) upheld the employment tribunal's decision that he was constructively dismissed rather than dismissed by reason of retirement. However, it rejected the lower tribunal's conclusion that the basis of his compensation should be restricted to service to the proposed retirement date. The EAT held that this was an error and that the relevant provisions within the Employment Equality (Age) Regulations do not inhibit a claim for compensation.
• Compulsory retirement age lawful
  Fuchs v Land Hessen, European Court of Justice, Cases C-159/10 and C-169/10, 21.7.11
  German state prosecutors are able to be compulsorily retired at age 65. The court ruled that this was not in breach of the Equal Treatment Framework Directive provided that it "has the aim of establishing a balanced age structure in order to encourage the recruitment and promotion of young people to improve personnel management and thereby to prevent possible disputes concerning employees' fitness to work beyond a certain age, and that it allows that aim to be achieved by appropriate and necessary means".
• Money-purchase schemes can have deficit
  Houldsworth v Bridge Trustees Ltd, Supreme Court [2011] UKSC 42
  The Imperial Décor Pension Scheme offered a guaranteed return on some contributions to its defined-contribution section, which could lead to a deficit arising. In addition, the scheme paid pensions from the scheme rather than buying annuities for members. Despite this, the court ruled that it was a money-purchase arrangement.
• Retirement notice wording sufficient
  Howard v Campbell's Caravans Ltd, Employment Appeal Tribunal, 12.5.11
  Mr Howard was retired by his employer at the end of the week in which his 65th birthday fell. He brought a case for age discrimination and unfair dismissal on the grounds that the purported retirement notification did not specify the retirement in accordance with the legislation because it said that he would be retired "after" his 65th birthday. The Employment Appeal Tribunal dismissed his appeal, finding that the word "after" did not always mean "on a date later than" and that in context the notification should be read as an intention to retire him on his 65th birthday.
• Human rights argument flawed
  Lithgows Ltd Pension Scheme (Trustees of the) v Board of the Pension Protection Fund, Court of Session, Inner House [2011] CSIH 6
  The trustees requested a review of their PPF levy invoice on the grounds that the financial information relating to one of the principal employer's subsidiaries, which was a limited partnership, had not been taken into account by D&B when determining the insolvency failure score. However, the company was only prepared to provide the necessary information if the PPF and D&B did not publish it on their database, a condition neither organisation was prepared to meet. At a late stage in the appeal against the final decision of the PPF, the trustees argued that if the PPF and D&B were to publish the financial information they would be in breach of the partners' rights under the Human Rights Act 1998 to enjoy respect for privacy in their private lives. The court dismissed the appeal on the view that using this mechanism to challenge the failure score was misconceived and that trying to challenge the score by questioning the calculation of the levy cannot be done legitimately.
• Hastings-Bass rule no longer correct
  Pitt v Holt, Court of Appeal [2011] EWCA Civ 197
  In two cases concerning discretionary trusts, the Court of Appeal considered the rule in Hastings-Bass, a principle developed in judgments over a period of years in the High Court, starting with the ruling in the pensions case Mettoy Pension Trustees Ltd v Evans. This rule provides that the exercise of a discretionary power by trustees may be declared void and set aside, even years after the event, on the basis that the trustees had failed to take into account relevant matters when exercising the power. The Court of Appeal held that the rule was not a correct statement of the law. It said that the failure of trustees to take into account a relevant factor did not render the act void, but it might be voidable if it could be shown to have been done in breach of a fiduciary duty on the part of the trustees.
• Failure to read information no excuse
  Platt v Commissioners of HM Revenue & Customs, First-tier Tribunal (Tax) [2011] UKFTT 606 (TC)
  Mr Platt appealed against the refusal by HM Revenue & Customs (HMRC) of a late claim for enhanced protection against the lifetime allowance charge under the Finance Act 2004. He had two pensions, an occupational pension that was in payment when the new tax regime was introduced, and a personal pension that was due to commence when he reached age 75. He claimed that until 2010 he had no idea that the taxation changes in the Act affected his pension. Although he had been sent several newsletters by his occupational scheme that referred to the "A day" changes, he had not read them properly. The tribunal held that, as some of the articles were worded in such a way that Mr Platt should have realised that his personal pension should be checked, he had no reasonable excuse not to have claimed protection by the due date.
• Pilots' retirement age discriminatory
  Prigge v Deutsche Lufthansa AG, European Court of Justice, Case C-447/09, 13.9.11
  The complainants were Lufthansa pilots who brought an action for age discrimination because their employment contracts were automatically terminated in accordance with a collective agreement at age 60. However, under both German and international law, commercial pilots are allowed to continue working, as long as they meet certain conditions, until age 65. The European Court of Justice held that, while having a compulsory retirement age for pilots could be justified under exemptions to the age discrimination legislation on the basis of the protection of the health and safety of the general public, having a retirement age of 60 was not proportional when other legislation did not require pilots to retire until age 65.
• Obligation of good faith not breached
  Prudential Staff Pensions Ltd v The Prudential Assurance Co Ltd, High Court, Chancery Division [2011] EWHC 960 (Ch)
  In 2005, The Prudential Assurance Co Ltd decided to change its policy of providing discretionary pension increases in line with the retail prices index (RPI) by introducing a cap of 2.5% a year. At the request of members, the scheme's trustee asked the court to determine whether this decision breached the employer's implied obligation of good faith in respect of defined-benefit members. The court held that the 2005 decision had not breached this implied obligation because the company could not be shown to have acted irrationally or perversely.
• No valid excuse for late pension protection submission
  Scurfield v Commissioners for HM Revenue & Customs, First-tier Tribunal (Tax) [2011] UKFTT 532 (TC)
  Mr Scurfield appealed against the decision of HM Revenue & Customs (HMRC) to refuse his application for lifetime allowance protection under the A-day tax regime introduced in 2006 because it was submitted late. The tax tribunal had to consider whether or not he had a reasonable excuse for his late application. He argued that he was not aware of changes to the tax regime in 2006 because he had been retired from his main occupation since 1992, had no financial adviser and had not paid contributions into a pension scheme of any sort for two years. The tribunal dismissed his appeal, agreeing with HMRC that ignorance of the law was no excuse in this instance as the 2006 pension tax changes had received a lot of publicity.
• Switch to CPI indexation legal
  Staff Side of the Police Negotiating Board v Secretary of State for Work and Pensions, High Court, Queen's Bench Division [2011] EWHC 3175 (Admin)
  The claimants applied to the High Court for judicial review of the Government's decision, announced in June 2010, to use the consumer prices index (CPI) instead of the RPI as the basis for the annual indexation of benefits, tax credits and public sector pensions from April 2011. The review was requested on a number of grounds, including that the CPI was not an index that the secretary of state was entitled to adopt (as it takes into account the substitution of lower-priced but equivalent products), that the decision had been made for an improper purpose, namely economic considerations, that representations had been made by the Government that the RPI would continue to be used, and that using the CPI did not comply with the statutory duty to promote equality of opportunity between men and women. The court dismissed the application on all counts, finding that there was nothing within the relevant legislation that forbade the secretary of state from taking economic considerations into account when deciding which index to use for revaluation purposes. 
• Removal of employer's veto valid
  Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustee Ltd, Court of Appeal [2011] EWCA Civ 543
  When the Merchant Navy Ratings Pension Fund was originally constituted in 1978, it contained a provision that effectively gave participating employers a veto over the trustee's proposals for meeting a deficiency. In 2001, the trustee of the scheme adopted a deficit repair plan and, as part of that, this provision that the trusts would be terminated if participating employers could not agree the measures was removed. In an earlier case it was conceded by a participating employer that the measure had been validly suspended. However, the issue then arose as to whether the amendment rule should be subject to an implied constraint that a similar veto-style provision had to be reintroduced into a further deficit repair plan if it affected participating employers who were not party to the 2001 arrangement. The Court of Appeal upheld the lower court's decision that no such constraint applied on the grounds that once a rule had been validly removed it was impossible to contend that a certain expression within that rule conferred a fundamental right that had to continue to be given effect as an implied restriction.