Occupational pensions in the UK:the current legal framework

Institute for Employment Rights

10 March 2010

How did we get here?

The Turner Commission

What went wrong?

“Explosive” growth in the period 1953-1967 3.1m increases to 8m The rise was affordable High marginal tax and corporation tax made it attractive Income policies constrained pay but not pensions Favoured by trade unions

But big gaps

Early leavers Partners Women’s benefits Pension increases

The Turner solution

“It is difficult to see private sector DB provision, certainly final salary in form, playing more than a minimal role in the future UK pension system”

So go DC

With a state pension scheme underpin

The Turner target

So where we are

Preserve what we have got

Manage the transition

Get used to DC

Statutory protection

Pensions Act 1995: Subsisting rights provisions

Preservation

Indexation

Discrimination

Contracting out

Superannuation Act 1972

Protection under the rules

Rare Lloyds Bank Ricoh Astra Zeneca Privatised utilities

Avoid by changing the contract of employment:

South West Trains v Wightman

Employer cannot risk triggering a section 75 debt

Changing the contract

Cut benefits by changing the contract of employment

Requires consent Unions in a potentially strong position

Terminate and re-employ

Potential claim for unfair dismissal What is the balance between the advantage to the employer and

the disadvantage to the employees? Was the dismissal procedurally fair?

Managing the transition

One scheme or two?

KPMG and Imperial Home Decor

Trust-based or contract-based?

Tax considerations

Monarch Airlines

Consultation requirements

Dealing with DC

Control issues

Trustees or management committee? PHI schemes – who controls the medical decisions?

Role of the provider

FSA regulation Changing the provider

The Regulator and the FSA

An early warning system: ranging from the trivial to the serious

Stringent timescales and penalties

But on its own, calls for a file to be opened and no more

TPR and FSA examples

Individual’s administration complaint: PAS and the ombudsmen

Late payment: the Regulator

Unit pricing error: the FSA

Allocation of contributions: joint

Poor investment performance: neither?

Regulator’s main concerns:

Lack of member understanding

Poor administrative practices

Unduly high charges

Poor decisions on retirement choices

The need for a model constitution

DC Governance

Occupational pensions in the UK:the current legal framework

Institute for Employment Rights

10 March 2010