Pensions Insight: 13 to 27 February 2023

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Gateley Legal

In this Insight we cover all recent key pensions developments including the recent court case which confirmed HMRC’s guidance on the meaning of ‘actual or prospective right’ in the protected pension age context, the Pensions Regulator’s ESG and climate change campaign and the FCA’s call for trustees to report pension transfer concerns.

Court ruling confirms HMRC’s guidance on the meaning of ‘actual or prospective right’ for protected pension age purposes

The High Court has provided useful confirmation on the meaning of having an ‘actual or prospective right’ to pension benefits in the context of protected pension ages (PPAs), particularly relevant at present because of the forthcoming increase to normal minimum pension age (NMPA) to 57 (see our Insight).

NMPA – the Finance Act 2004 and the PPA regime

Under the Finance Act 2004, NMPA is the earliest age at which members can access pension benefits without the payment being unauthorised (unless the member has a PPA or is in ill-health). When introduced in April 2006 NMPA was 50 and remained this age until 6 April 2010 when it increased to 55. Except for uniformed services members, NMPA is due to increase again to 57 on and after 6 April 2028.

Certain conditions must be met for a member to have a PPA. One of the conditions is an entitlement one, that members must have had an “actual or prospective right under the pension scheme to any benefit from an age of less than” 55 (as in the present case) or 57 (in the case of the PPA regime applicable to the NMPA 57 increase).

Facts of the case

The member in the case of Devon and Somerset Fire and Rescue Authority v Howell [2023] EWHC 257 (Ch) was a Chief Fire Officer. The scheme’s rules provided that, to be entitled to an ordinary pension from age 50, certain circumstances had to apply including that notice of authority had to be given with the fire and rescue authority’s permission. The authority would not give permission if the pension would be ‘unauthorised’. The court had to decide whether a right conditional on ‘permission’ was an ‘actual or prospective right’ such that the member could receive his pension before age 55 without the payment being unauthorised with consequential tax charges.

Meaning of ‘actual or prospective right’

The court considered the dictionary meanings of ‘actual’ and ‘prospective’. However, it felt that these could not wholly determine the meaning and looked to relevant case law, the Finance Act 2004 explanatory notes and HMRC guidance to assist.

The explanatory notes to the Finance Act 2004 say that a requirement for third-party consent means that the ‘entitlement condition’ would not be met. Additionally, HMRC guidance interprets an actual or prospective right as meaning an ‘unqualified right’, and states that “an individual has an unqualified right to take benefits if they do not need the consent of anybody before they can take their benefits”. The court agreed with this interpretation.

The court’s decision – no entitlement for the member to retire before age 55

The court held that the requirement for ‘permission’ was the same as consent and the requirement for a third party’s consent meant that the member did not have a prospective right to retire earlier than age 55. Therefore, any payment of pension to him before this age would be unauthorised.

Additional court guidance

The court also provided useful additional guidance on the meaning of ‘actual or prospective right’:

  • an actual right to a benefit means the right must be an “immediate right… and subject to no contingencies”;
  • a prospective right to a benefit is one where there is no immediate right but a contingent future right subject to future contingencies (subject to (3));
  • a future contingency such as attaining a certain age or one “wholly within the control of the member” means that the right is prospective but one that requires consent or permission (as in this case) means that the right is not prospective.

This case is useful because it confirms HMRC’s understanding of the meaning of ‘actual or prospective right’ and provides the pensions industry with certainty as to how the term should be interpreted.

If they have not done so already, trustees should check their scheme’s rules to see whether members’ normal minimum pension age will increase to 57 on and from 6 April 2028, update relevant scheme documents if necessary and communicate with members accordingly.

TPR campaign to make sure ESG and climate change requirements are being met

On 21 February 2023, the Pensions Regulator (tPR) launched its campaign, first announced some time ago, to check that trustees are satisfying their environmental social governance (ESG) and climate change reporting duties which include a requirement for:

  • schemes which are required to produce a statement of investment principles (a SIP) to include details relating to consideration of financially material ESG and climate factors, to produce an implementation statement and to publish both documents; and
  • schemes with relevant assets of £1bn or more to publish an annual climate change (TCFD) report.

As part of the campaign, the Regulator will also review a sample of SIP and implementation statements and publish its findings.

The checks will be carried out through analysis of scheme return data. The Regulator is already looking at the SIP and implementation statement information provided in the 2022 DC scheme return and has noted that some schemes have not provided valid publication details – affected schemes can expect to be contacted by the Regulator in March.

FCA webpage on reporting concerning pension transfer requests

The Financial Conduct Authority (FCA) has set up a new webpage asking for pension schemes and trustees to report ‘serious concerns’ about any transfer requests – these would include there being a number of red or amber flags or refusing a transfer. In particular, the FCA would like to hear about the following.

  • Individuals giving unauthorised advice on pension transfers.


1. The involvement of an unregulated introducer even though the advice is from a regulated firm – the introducer may be carrying out regulated activities without the necessary regulatory permissions.

2. An overseas adviser providing advice on overseas investments that could only be bought if the member transfers out of the UK scheme with no regulated firm in the UK providing advice.

  • Increases in the volume of transfers involving the same adviser.


1. ‘Factory gating’ risk, where a firm may target a certain sector of workers in large workforces when circumstances may make them more attracted to a transfer and scam victims persuading contacts to also transfer. Both can lead to a flurry of transfer requests to a certain scheme or using a certain firm.

2. Transfers to a receiving scheme linked to a new employer after a corporate or Transfer of Undertakings (Protection of Employment) (TUPE) transfer may not be a cause for concern.

  • If the member decided to ask for a transfer after a cold call or unsolicited contact.
  • If the member was offered an incentive.
  • If the receiving scheme has high risk or unregulated investments.
  • If the receiving scheme’s charges are unclear or high.
  • If the receiving scheme has an investment structure that is unclear, complex or unorthodox.
  • Potential scam activity.

The webpage gives more detail regarding what information to provide and how to report.

PPF 7800 Index Report shows funding has decreased

The latest PPF 7800 Index Report setting out the estimated funding position on a section 179 basis as at the end of January 2023 of the eligible 5,131 defined benefit (DB) schemes shows that:

  • the aggregate surplus of these schemes decreased over the month to £374.4bn from a surplus of £376.7bn at the end of December 2022;
  • total assets were £1,450.6bn and total liabilities were £1,076.2bn;
  • the funding ratio decreased from 136.5% at the end of December 2022 to 134.8% at the end of last month; and
  • there were 706 schemes in deficit and 4,425 schemes in surplus.

PASA guidance on data readiness for buy-in and buy-out

The Pensions Administration Standards Association (PASA) has published guidance on preparing scheme data for buy-ins and buy-outs with insurer providers. Having good quality data helps with insurer transactions – it avoids delays and higher transaction costs.

The guidance covers the effects of having incomplete and poor-quality data, the main data items that should be kept for members, and what steps trustees can take before a transaction to show effective governance.

As regards data quality, PASA notes the importance of going to market with high-quality data – this will avoid ‘nasty surprises’ in any balancing premium which trustees might face if an issue is discovered with the data which leads to a material adjustment in the contract. In addition, without accurate and complete information insurers make assumptions on a prudent basis which can impact costings.

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