On this summer lunchtime in July, as blue skies backdrop the birds flying by the Spence office windows, and tourists bustle by on the streets below, I’ve found myself looking for inspiration for an introduction for this quarter’s pension update. Yet, I needn’t have looked far. Classic lyrics from The Byrds, that have been stuck in my head for a few days now, might just do the trick. Read more »
Posts by Andrew
“If Mr Walker was married to a woman, or, indeed, if he married a woman in the future, she would be entitled on his death to the pension provided by the scheme to a surviving spouse. When the claim was issued, the value of that “spouse’s pension” was about £45,700 per annum. As things stand at present, Mr Walker’s husband will be entitled to a pension of about £1,000 per annum (the statutory guaranteed minimum).”
This is how the Supreme Court judgement described the situation in which Mr Walker found himself, in relation to his membership of Innospec’s DB scheme. How did this happen? Ironically it was the anti discrimination provision in the Equal Treatment Framework Directive, coupled with scheme rules, that allowed this disparity to occur in respect of same sex survivors’ pensions. Read more »
Well, the wait is finally over. Horton v Henry has been decided. After hearing arguments in April and deliberating over this important decision for 6 months, the Court of Appeal released their much anticipated judgment on 7th October 2016. Unfortunately for me, this came a week after my summary of the case history was published in PMI News with a “wait and see” conclusion on the Horton decision. The Lord Justices clearly forgot to give me a heads-up… so rude!
Anyway, as mentioned in my article and earlier blog this decision has been a long time coming. A controversial and potentially devastating judgment for bankrupts (Raithatha in 2012) has been put to bed, meaning bankrupts can now breathe a sigh of relief that their entire pension pots post Pension Freedoms are not at risk of an Income Payment Order. Read more »
One thing you can be sure of is that there is no shortage of pension updates hitting your inbox on an almost daily basis – updates we don’t always get round to reading. Here at Spence we like to be helpful so to save you time, the team have scoured the news and developments which have impacted the pensions world in the last quarter and produced an update of the most topical, newsworthy and essential matters that you need to see to keep you updated and informed.
This quarters highlights include
- 5 investment questions to ask post Brexit.
- We are still in Europe so how does this affect risk assessment frameworks?
- Gilt yields have been detrimentally effected by Brexit but what does this mean for transfer values and funding?
- We explain HMRC’s latest announcement on VAT and pension schemes.
- What’s been happening with the Pensions Ombudsman and in the Court?
- Governance has been tightened up for DC Schemes. We explain how.
Christmas presents? Fine. Out of season clothes? Sure. Those trainers you bought two years ago that you’ve worn once but you’re definitely going to go running with again? Absolutely, chuck them out. How about your retirement savings? Under the bed!? Surely not.
As the Brexit splash continues to ripple through the economy, we are now facing the very real possibility of the UK joining the growing club of major states with negative base interest rates. In terms of pension schemes themselves, this won’t be a significant shock – they have been feeling the pain on their funding levels for a number of years with the low interest rate environment. Putting a ‘–‘ in front of the base rate isn’t going to shock schemes who have been seeing the number behind the ‘–‘ in their funding results growing year on year. Their pain will continue, but it’d hardly be a game-changer in the current environment.
The group that could truly be shocked are savers, and in particular, pensioners. To finally make some sense of my opening, Ros Altmann reacted to the news that Natwest had warned corporate customers that they may have to charge interest on accounts in credit, should the Bank of England dip the interest rate into the sub-zero waters. Should that happen, many will anxiously wait to see if those charges seep across to personal savings accounts too. If that levee were to break, the outgoing Pensions Minister said “the danger is many people will just think, “I’m going to put the money under the mattress.””
In truth, pensioners have been feeling the pain of low interest rates for some time now, right across Europe. Despite showing real patience – or perhaps acquiescence – with little to no returns, surely those same people would jump into action if their savings actually started to shrink. For many, it could be the watershed moment and see them rescue their savings and bring them closer to home. After all, if it’s good enough for the Commerzbank in Germany (who are reportedly considering shifting billions of euros to their vaults, rather than pay for the ECB to hold it under its negative rates) why isn’t it good enough for Joe Bloggs Snr.
While it may be reasonable to follow the actions of a big bank with its hundreds of financial advisors, Mr Bloggs Snr is different – he doesn’t have a vault. Should pensioners take such action, there have to be real security fears for their savings, as well as their own health and safety. Beyond the concerns of large amounts of cash being under beds, there is also the real possibility that these concerned pensioners may be more susceptible to pension/investment scams, offering a safe haven with fantastic (aka. positive) returns on their savings, just like they used to have. Should negative interest rates come our way, the industry should be alive to these risks arising.
Some may sneer and feel this is an overreaction. Some may say that it will never come to that. Well, we live in a world where Brexit is happening, Donald Trump is 270 electoral college votes from the White House and Leicester City are preparing to defend their Premier League title. Stranger things have happened…
Baroness Altmann (or perhaps her successor) may yet have to fetch Workie out from under the bed.
(The ‘H’ on my keyboard is in for a tough afternoon!)
Good news for bankrupts. Bad news for creditors. Important news for trustees in bankruptcy and pension scheme trustees alike. The High Court, in the case of Hinton v Wotherspoon, has delivered a judgement that provides real clarity on how the pension income of a bankrupt can be subjected to an Income Payments Order (“IPO”).
Now, it has to be said at the outset, that a case on the same issue (Horton v Henry) – that Hinton proclaimed as “plainly correct” – was heard by the Court of Appeal in April. That decision will be crucial, as it will represent a binding decision from a higher court, unlike Hinton and Horton that are both first instance decisions in the High Court. Read more »
An epic journey was concluded at the High Court at the end of February, when the titanic Merchant Navy Ratings case finally reached its destination. Having set sail in 2001, with a £333m deficit in its wake, carrying approximately 30,000 members, 40 current and 200 historic employers (and not to mention a crew full of lawyers!), the case was decided after 18 days of hearings, producing a judgement over 150 pages, 500 paragraphs and 80,000 words long. You could drown in such numbers.
Nautical puns aside (for now), the Merchant Navy judgement had been eagerly awaited. In truth, it all started in 2001 when the courts confirmed that only the 40 current employers had to pay deficit contributions, despite only holding 30% of the total liabilities. Then in 2009 the largest employer, Stena Line – understandably unsatisfied with cross-subsidising the pension liabilities attributable to the historic (competing) employers – succeeded with a case to confirm that the trustee could require historic employers to once again pay contributions. Read more »