Legal Practice Notes

This Practice Note offers an overview of pension liberation—explaining what it is, why it occurs, the common structures and principal features involved, and the issues each party should weigh in practice. For detailed guidance on the legal aspects arising in this context and related matters, see Practice Note: Pension liberation and pension scams—legal considerations. For further material on arrangements suspected of pension liberation and the steps taken by the Pensions Regulator up to 2018, see Practice Note: Pension liberation—actions taken by the Pensions Regulator until 2018 [ Archived]. For further insight into complaints decided by the Pensions Ombudsman concerning transfers of pension funds linked to pension liberation or scams up to 2018, see Practice Note: Pension liberation—key Pensions Ombudsman decisions up to 2018 [ Archived]. The rise of pension liberation In essence, a pension is a mechanism through which an individual, or an...

Pension liberation and other pension scams Over recent years, the pensions sector has shifted from ‘pension liberation’ (see definition below) towards investment scams and frauds that coax savers to transfer their pension pot into unsuitable or exotic assets, which are unlikely to deliver the promised returns and may attract high charges and fees (see definition of ‘pension scam’ below). This Practice Note examines the legal issues arising around pension liberation and other pension scams, including enforcement matters and the actions taken by the Pensions Regulator, the Pensions Ombudsman, HMRC and the Insolvency Service to counter such activity. It also provides practical pointers for trustees and other pension providers—see Practical guidance for trustees/providers, below. As scam methods continue to evolve, pension liberation has become less common. Other pension scams may involve persuading members to transfer their pension savings into occupational pension schemes so as to invest them in...

ARCHIVED : This archived Practice Note examines several significant complaints decided by the Pensions Ombudsman up to 2018, arising from transfers of pension funds linked to pension liberation or pension scams. It is no longer updated and is provided for background reference only. It is not kept up to date and is intended purely as background. For details on the various types of pension liberation and the legal issues that arise, refer to Practice Notes: Pension liberation—an introduction and Pension liberation and pension scams—legal considerations. Numerous complaints have been adjudicated by the Pensions Ombudsman concerning transfers of pension funds associated with pension liberation or pension scams......

An indemnity is a contractual responsibility resting on one of the contracting parties (the indemnifier) and owed to the other contracting party (the indemnified party), that responsibility being for the indemnifier to pay, or otherwise recompense, the indemnified party in respect of specified liabilities incurred or assumed by the indemnified party (such liabilities commonly arising after the contract is signed)......

ARCHIVED : This archived Practice Note relates to the pension freedoms (also referred to as pension flexibilities) that took effect on 6 April 2015. It is not maintained. Prior to 6 April 2015, defined contribution ( DC) pension pots were, broadly, restricted to purchasing a lifetime annuity, being turned into a scheme pension, accessed through drawdown, or paid as a trivial lump sum (for further details, see Practice Note: Retirement options— DC members— How can the pension pot be used on retirement?). In the Budget of 19 March 2014 it was confirmed that, from 6 April 2015, the rules governing DC pension pots and other ‘flexible benefits’ would be relaxed. This relaxation of access to flexible benefits is commonly known as the pension freedoms (or pension flexibilities). The government’s objective in introducing the pension freedoms was to provide members with greater control over their...

This Practice Note contains references to case law of the Court of Justice of the European Union ( CJEU). For guidance on whether EU judgments are binding on UK courts, see Practice Note: Assimilated law — Assimilated case law. On 17 May 1990, the European Court of Justice ruled, in Barber v Guardian Royal Exchange, that the entitlement of men and women to equal pay for equal work, or work of equal value, also embraces the element of remuneration made up of pension benefits. As a result, many schemes needed amendments to their governing documents so as to provide equal pension benefits for men and women. The exercise of implementing the Barber principle became known as equalisation. Although the precise scope of Barber was initially unclear, the outstanding issues were very largely settled by further cases, culminating in Coloroll Trustees v Russell. For further...

THIS PRACTICE NOTE APPLIES TO MONEY PURCHASE ARRANGEMENTS FROM 6 APRIL 2015 From 6 April 2015, new pension flexibilities expanded the retirement choices for DC members and others with ‘flexible benefits’ (in essence, money purchase and/or cash balance entitlements). As part of those reforms, drawdown became more broadly accessible. For background on the changes implemented on 6 April 2015, see Practice Note: Pension freedoms—an introduction [ Archived]. This Practice Note concentrates on the legal framework for drawdown arrangements set up on and after 6 April 2015. It also addresses how pre- April 2015 drawdown is treated from that date. For the rules governing drawdown before 6 April 2015, see Practice Note: Drawdown between 6 April 2011 and 5 April 2015 [ Archived]. What is drawdown? The label ‘drawdown pension’ (often called ‘flexible income’) replaced ‘unsecured pension’ and ‘alternatively secured pension’ used up to 5 April 2011....

This guide is chiefly directed at trainees, recently qualified solicitors and others who are new to, or inexperienced with, pensions law. Disagreements about pension schemes arise in many ways and, depending on the scheme type and the dispute’s character, there are different routes for pursuing them, and the applicable procedures for progressing those disputes can vary considerably. Disputes relating to occupational pension schemes An employee (or former employee) with a complaint about pension entitlements under a trust-based occupational scheme gained during employment may, subject to the specific facts, including the context and documentation on which their position depends, have two main paths to advance their claim: submit a written grievance to their employer—available where the pension issue can be shown to concern contractual rights under the employment contract in force at the relevant time (a contractual claim), or submit a written...

Why is greater transparency required? Over time, the Kay Review, the FCA and the House of Commons' Work and Pensions Committee reached the following findings regarding the disclosure of member-borne costs and charges: Cost information provided to retail customers was not complete. The Kay Review, in particular, determined that outlays tied to implementing exit — for example, performance fees and portfolio turnover costs — were not reported to pension funds even though they were charged to those funds. Disclosure was uneven. In its 2014 Thematic Review TR14/7, the FCA noted that although some investment firms presented customers with consistent, combined charge figures across all relevant documents and platforms, there remained instances of firms quoting different charge figures across multiple documents, making fair comparisons difficult......

This Practice Note cites decisions of the Court of Justice of the European Union. For advice on the extent to which EU rulings bind the courts of the United Kingdom, consult Practice Note: Assimilated law — Assimilated case law. The legislative framework Two distinct legislative strands must be assessed when considering part-time workers and discrimination. The first concerns equal treatment as between men and women. Because, historically, women have been more likely than men to work part-time, employment conditions, including pension scheme terms, that treat part-time staff less favourably may amount to discrimination against women. The second concerns measures directed specifically at safeguarding part-time workers. Equal treatment legislation Provisions intended to guarantee equality for men and women in relation to pension schemes have a long history. The current domestic position is contained in section 67 of the Equality Act 2010 ( Eq A 2010), which...

Practice Note This Practice Note includes references to case law from the Court of Justice of the European Union ( CJEU). For guidance on whether EU judgments are binding on UK courts, consult Practice Note: Assimilated law — Assimilated case law. Please note that, while UK measures implementing directives form part of domestic law, the directives themselves are not. For further detail, see Practice Note: Assimilated law. A significant proportion of the leading authorities on discrimination and part-time workers centred on sex discrimination, reflecting that most part-time roles were held by women. Accordingly, claims could be framed as indirect sex discrimination even in the absence of specific protection for part-time workers. These cases are considered in the Practice Note: Sex discrimination for pension lawyers. This Practice Note examines the principal decisions in which the courts have dealt with claims relating...

This Practice Note This Practice Note outlines the various forms of overseas pension arrangements and their characteristics, together with valuation, procedural and enforcement considerations that family practitioners may face when overseas pensions arise within financial proceedings. When pursuing a financial remedy application, practitioners may come across a spectrum of pension or pension‑type schemes, including those accumulated or transferred abroad. Close scrutiny of the rules governing any non‑ UK pension scheme is essential, as they may differ markedly from those familiar in the UK. Certain overseas pensions are more readily realisable than UK schemes and can be treated as an additional pool of capital for distribution; accordingly, a conventional lump sum order might be made instead of a pension sharing or attachment order, to divide the available funds either immediately or on a deferred basis. Consider arranging life assurance to cover the period before the lump sum is...

NOTE : On 2 December 2024, the Lord Chancellor confirmed a change to a positive 0.5% discount rate. That positive 0.5% rate takes effect from 11 January 2025. Schedule A1 to the Damages Act 1996 stipulates that subsequent reviews must take place within five years of the conclusion of the preceding review, which means the next review is required to commence on or before 2 December 2029......

THIS PRACTICE NOTE APPLIES TO OCCUPATIONAL PENSION SCHEMES ONLY Under preservation law, a short service benefit is the pension entitlement that must be given to a member who leaves an occupational pension scheme before retirement, without any immediate pension being payable. Not every early leaver is entitled to have their pension rights preserved within the scheme itself. This Practice Note considers rights and choices open to early leavers who currently lack a short service benefit. For wider guidance on preserving benefits within schemes, see Practice Note: Early leavers—preservation for more detail. In this Practice Note, references to trustees also include the managers of a scheme. When will an early leaver be entitled to a short service benefit?......

The Fraud Compensation Fund ( FCF) was set up as a statutory fund under section 188 of the Pensions Act 2004 ( Pe A 2004) to provide compensation to trustees or scheme managers of occupational pension schemes where a scheme’s assets have been reduced due to an act or omission amounting to an offence of dishonesty. The FCF is administered by the Board of the Pension Protection Fund ( PPF), which was created under Pe A 2004, s 107. For details on the PPF’s general operations, see Practice Note: The Pension Protection Fund—an introduction. The obligation to make fraud compensation payments The PPF’s obligation to pay fraud compensation in respect of an occupational scheme arises under Pe A 2004, Pt 2, Ch 4. The duty to make such payments is set out in Pe A 2004, s 182. Under Pe A 2004, s 182(1), the PPF must make one or...

Statutory duty to establish an effective system of governance including internal controls ( ESOG) Before 13 January 2019, trustees of occupational pension schemes were subject to a narrow statutory obligation to put in place and run internal controls that were ‘adequate’ to ensure compliance with scheme rules and legal duties. This obligation was contained in section 249A of the Pensions Act 2004 ( Pe A 2004). From 13 January 2019, the ambit of Pe A 2004, s 249A was widened to require trustees of an occupational pension scheme to establish and operate an effective system of governance ( ESOG) that includes internal controls. That system must be proportionate to the scheme’s size, nature, scale and complexity. The change was introduced by the Occupational Pension Schemes ( Governance) ( Amendment) Regulations 2018, SI 2018/1103, which implemented elements of the governance obligations in Archived...

FORTHCOMING DEVELOPMENT : Section 10 of the Finance Act 2022 will raise the normal minimum pension age ( NMPA) from 55 to 57 on 6 April 2028, excluding members of the firefighters, police and armed forces public service pension schemes. The same Act will additionally permit members of registered pension schemes to access benefits before age 57 where, on or before 4 November 2021, either of the following applied: they already held an unqualified right to take benefits from that scheme; or they were part-way through a substantive transfer to a scheme conferring an unqualified right to a protected pension age below 57 on or before 4 November 2021. These conditions preserve access to a protected pension age of under 57 where satisfied by that date. To rely on this new 2028 protection, the scheme’s rules must, as at 11 February 2021, have provided an...

This practice note applies to occupational pension schemes The statutory basis for an occupational pension scheme’s internal dispute resolution procedure ( IDRP) is found in: sections 50, 50A and 50B of the Pensions Act 1995 ( PA 1995); and the Occupational Pension Schemes ( Internal Dispute Resolution Procedure Consequential and Miscellaneous Amendments) Regulations 2008, SI 2008/649 The Pensions Regulator’s General Code of Practice also contains a section dealing with dispute resolution procedures within schemes. Scope of IDRP Trustees of pension schemes must create, operate and oversee the scheme’s IDRP, and ensure it is properly managed. Through the IDRP, members—and others with an interest—may contest decisions, actions or failures connected to their scheme benefits or the pension scheme itself. Those regarded as having an interest include people who have ceased, or say they have ceased, to be a member or beneficiary of the scheme, as well as...

THIS PRACTICE NOTE ONLY APPLIES TO OCCUPATIONAL PENSION SCHEMES This Practice Note examines specific examples of: where the Pensions Regulator (the Regulator) has made an order directing or authorising the winding-up of an occupational pension scheme under the Pensions Act 1995 ( PA 1995), s 11(1) (a ‘section 11 order’), together with the Determinations Panel’s rationale for issuing the order in each case where the Determinations Panel has declined to make a section 11 order In practice, it should only in very rare situations be necessary for the Regulator to exercise its powers to wind up a scheme, and the Regulator is generally unlikely to make a section 11 order without a compelling case being presented to it. Alternatively, it may, in exceptional circumstances, be necessary to apply to the court for directions to wind up a scheme......

The Employment Rights Act 1996 ( ERA 1996) permits employee trustees of an occupational pension scheme, or directors of trustee companies, to take reasonable paid time away during working hours to carry out their trustee functions, including attending appropriate training. For further information, see: Time off for pension scheme trustees, below. It also grants a right not to be subjected to any detriment by the employer for acting as a trustee of the employer’s scheme (see Trustee protection from detriment, below) and safeguards them from dismissal because they are a trustee of the employer’s scheme, or for fulfilling their trustee duties (see: Trustee protection from dismissal, below). For a sample policy allowing time off for an employee who is a pension scheme trustee, see Precedent: Policy—time off for pension scheme trustees. For guidance on the general right to time off for public duties, see...