Pensions: what’s new this week – April 2022 # 3 | Allen & Overy LLP
Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.
This week we cover topics such as: Guidance on GMP Equalization Interest Payments; Court: pension plan administrator not prejudicially treated by employer; Court: IA deadlines do not apply until correct information has been provided; PRA Statement on Capital Arbitrage Transactions; HMRC Pension Management Information Bulletin; PASA guidance on anti-fraud checks prior to hiring administrators.
- Guidance on BPF equalization interest payments
- Court: pension plan administrator not prejudicially treated by employer
- Court: EI deadlines do not apply until correct information is provided
- PRA Statement on Capital Arbitrage Transactions
- HMRC Pension Management Information Bulletin
- PASA guidance on pre-employment fraud checks for administrators
Guidance on BPF equalization interest payments
The Pensions and Lifetime Savings Association (PLSA) has issued HMRC approved guidance on the tax treatment of interest payments on pension arrears paid as a result of GMP Equalization (GMPE), and whether tax on these payments must be deducted at source. HMRC has confirmed that for the purposes of the GMPE:
- (for pension tax purposes) interest payments should be treated as interest payments made in respect of late payment of pension installments;
- the interest is likely to be “annual interest” for tax purposes, and an obligation to withhold income tax is unlikely to arise in most circumstances; and
- the interest element should be covered by the personal savings allowance, although this is primarily a point for individuals and their particular circumstances.
The guidance notes say HMRC may include further clarification in a future bulletin (possibly at the end of May).
Read the tips.
Court: pension plan administrator not prejudicially treated by employer
The labor court rejected an employee’s claim that she suffered damages by becoming a trustee of her employer’s pension plan: Folarin v Transport for London.
The judge concluded that there had been no prejudice. Among other things, they noted that it was reasonable to expect certain trustee duties to be performed outside normal working hours (in addition to being released several days a year for trustee duties). The employee was not entitled to a reduced workload to accommodate her duties as a trustee (she had been granted time off to attend meetings and receive training as a trustee, but it was initially expected that that she produces the same work as her colleagues).
The circumstances of the case are complex, involving an internal grievance process and an evolving understanding of the time required to be a trustee. This is a useful reminder of the broader context to be considered for trustees who are active employees of the plan sponsor or group, particularly given the increased knowledge of trustees and requirements for of governance.
Read the case.
Court: EI deadlines do not apply until correct information is provided
The First Tier Tax Tribunal found that HMRC was wrong to withdraw a claimant’s fixed protection (protection allowing for a higher lifetime allowance – the amount a person can save over their lifetime in a tax-efficient way ) when incorrect Auto-Registration (AE) information was given: Moan v Revenue and Customs Commissioners.
The plaintiff had clearly indicated that he did not wish to join his employer’s pension plan, in order to avoid losing his fixed coverage. However, he did not complete an opt-out form within a month of enrolling and was therefore enrolled in the scheme. The information provided on his registration was incorrect (his AE date was wrong, having been postponed without notice) and the judge ruled that the unregistration deadline only applied once the correct information was provided. Therefore, the plaintiff’s subsequent opt-out had been granted in time and the fixed protection should not have been withdrawn.
The judge also found that information had been “given” in this case, even though the email sent may have been missed or deleted by the plaintiff because it looked like “junk mail” – if the information contained in the e-mail was correct, the plaintiff’s opt-out notification would not have been made in time and he would have lost his Fixed Protection.
Read the case.
PRA Statement on Capital Arbitrage Transactions
The Prudential Regulation Authority (PRA) has released an update on its approach to capital arbitrage trading. This is aimed at PRA-regulated companies that have entered into, or are considering entering into, deficit reduction transactions with their DB pension plans that are structured to limit the resulting regulatory capital impact. The statement indicates that these types of transactions may not be compatible with a company’s obligations and that the PRA will carefully consider them.
Read the statement.
HMRC Pension Management Information Bulletin
HMRC has released its latest Pension Management Service (MPSS) newsletter. It contains information about migrating schemas to MPSS (what schemas can now do); new features added to MPSS; recreate relationships with, or add new, plan administrators and licensed practitioners; reports ; make payments for charges; financial information; update details; and schemes without Pension Scheme Tax Reference (PSTR).
Read the newsletter.
PASA guidance on pre-employment fraud checks for administrators
The Pensions Administration Standards Association (PASA) has issued guidance for pension plan administrators on vetting new employees, in response to cases of fraud committed or assisted by employees of pension plan administrators. In some cases, people have deliberately obtained employment with the specific intent of committing fraud. The guidance aims to help directors counter this risk.
Read the tips.