ISSUES AFFECTING ALL SCHEMES

Pension scams – revised code

The Pension Scams Industry Group has published version 2.2 of its code of good practice on combating pension scams. The revised version, which is effective from 1 April, includes a summary of changes since version 2.1 which was published in June 2019. The changes include:

• A new example letter warning a member who is thinking of transferring their defined benefits to a DC arrangement of the risks of doing so.
• A recommendation for schemes to consider using the telephone to better engage with members during the due diligence process.
• A requirement for all transfers of concern to be reported to the relevant agencies rather than just transfers which are refused.
• Inclusion of additional questions in the

In addition, the Pensions Regulator has published a webinar on how trustees and administrators can help protect scheme members from scams.

Action

Schemes should ensure that they refer to the revised code when processing transfer requests.

Cross-border schemes – Brexit

The Pensions Regulator has updated its guidance for UK cross-border schemes and UK employers that are contributing to schemes established outside the UK following Brexit. The updated guidance clarifies that, post-Brexit, UK employers cannot continue to use a scheme established outside the UK as an automatic enrolment scheme (i.e. a scheme which the employer can use to meet its automatic enrolment duties in respect of eligible jobholders who are not members of a qualifying scheme on their automatic enrolment date). However, UK employers may be able to continue using a scheme established outside the UK as a qualifying scheme (i.e. a scheme which the employer can use to meet its automatic enrolment duties in respect of eligible jobholders who are members of the scheme on their automatic enrolment date).

Action

Employers who contribute to a cross-border scheme should review the guidance and ensure that they are still meeting their automatic enrolment duties.

Climate change – Pensions Regulator strategy

The Pensions Regulator has published a document setting out its strategic response to climate change and how it thinks it can help trustees meet the challenges from climate change. The strategy notes that larger schemes will become subject to new climate risk-related governance and reporting obligations later this year, but also states that the Regulator expects all trustees to comply with the existing requirements to publish their statement of investment principles and their implementation statement. Where schemes do not comply, and it is appropriate to do so, the Regulator will take enforcement action.

The Regulator plans to support trustees in a range of ways including by:

• Publishing guidance on the new climate risk-related governance and reporting obligations.
• Sharing best practice annual climate risk reports.
• Including climate change and stewardship modules in its new consolidated code of practice.
• Updating the climate change content in the Trustee Toolkit.

Action

No action required.

Errors in scheme rules – correction

The High Court has decided that scheme rules could be rectified (i.e. corrected) to reinstate words that had been omitted from the pension increase rule. The omission of the words had the effect of hardcoding the Retail Prices Index (RPI) as the scheme's indexation measure. The judge noted that he had been provided with a substantial body of evidence and witness statements demonstrating that neither the trustee nor the sponsoring employer had had the intention of removing the omitted words and that this was "the clearest possible case for rectification of a pension deed based on an omission that was not noted by any of the persons involved".

The judge also considered representations made by two members during the course of a member consultation exercise that was conducted about the proposal to apply for rectification. The two members said that they would have made different retirement decisions had they known that their pension would not definitely receive RPI-based increases. Among other things, the judge noted that the representative beneficiary had made the decision not to oppose the claim for rectification. The judge also concluded that there was no or inadequate evidence to support a claim that the trustee and the sponsoring employer were estopped (i.e. prevented) from asking for the rules to be corrected.

Iggesund Paperboard (Workington) Ltd and another v Messenger [2021] EWHC 627 (Ch)

Action

No action required.

Transfer requests – due diligence

The Pensions Ombudsman has dismissed a complaint about the level of due diligence carried out by a personal pension scheme provider in connection with a transfer to a suspected scam vehicle. In August 2014, following an unsolicited approach by an unregulated firm, the member requested a transfer to a single member occupational pension scheme. The administrator of the receiving scheme submitted the completed transfer request documentation and enclosed a range of supporting information, including a letter from the member confirming that he was aware of pensions liberation issues and had carefully considered his decision to request a transfer.

On 12 August 2014, the provider sent the member a letter setting out various concerns regarding the investment advice received by the member, the terms of the receiving scheme, and the way in which it was proposed that the member's funds would be invested by the receiving scheme. The letter also referred the member to the Pensions Regulator's Scorpion leaflet that had been included in the transfer pack sent to him. The member returned a completed comprehensive discharge form and declaration which, among other things, confirmed that he had read the 12 August 2014 letter. The provider processed the transfer and the receiving scheme invested the bulk of the transfer monies in commercial property in Cape Verde. The member subsequently became aware that the Cape Verde investment may have been a scam. He complained that the provider had carried out insufficient due diligence and had failed to warn him about the potential risks of the transfer.

The Ombudsman decided that the provider had provided the member with sufficient information through the warnings in its 12 August 2014 letter and the Regulator's Scorpion leaflet for him to have known about the possibility of pensions liberation and its consequences. The member's losses arose from the Cape Verde investment.

The provider had pointed out the risks associated with overseas investments, but it was not its responsibility to advise or otherwise comment on the suitability of the investment.

Mr R (PO-28256)

Action

No action required.

Click here to continue reading . . .

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2020. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.