Pensions legislation and case law update: the latest developments week ended 30th October 2020

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In this week’s edition we look at the recently published Pensions Regulator guidance on transferring to a defined benefit superfund and the Association of Professional Pension Trustees’ new code of practice for professional corporate sole trustees.

The Pensions Regulator issues guidance on DB superfunds

The Pensions Regulator (the Regulator) has issued guidance for trustees and sponsoring employers considering transferring to a defined benefit superfund (Guidance). The guidance sets out the Regulator’s approach to the regulation of such transfers and has been introduced as an interim regulatory regime while the Department for Work and Pensions develops a legislative authorisation and supervision framework.

The key headlines to draw from the guidance are summarised below: 

  • The Regulator considers the transfer to a superfund to be a new Type A event which will require clearance. 
  • The Regulator will assess whether any potential detriment to the scheme caused by the transfer has been mitigated - the detriment is caused by the removal of the link to the current sponsor’s covenant.  
  • A transfer to a superfund should only be considered if a scheme cannot afford to buy out now and there is no realistic prospect of buy-out in the foreseeable future. 
  • The Regulator expects trustees to consider at the outset whether a transfer to a superfund would improve the likelihood of members receiving full benefits.
  • The Regulator expects that trustees are able to evidence their considerations and the steps they have taken to satisfy themselves that a transfer to a superfund is in members’ best interests. 

Once a clearance application, and any accompanying evidence, has been submitted, the Regulator states that applicants should allow at least three months for a decision to be made.     

Key Point:   

The Regulator has encouraged trustees and employers considering transacting with superfunds to engage with it at an early stage and to be open and transparent with members about any proposal and throughout the transaction. Whilst more choice is to be welcomed as not every scheme will be able to afford to buy-out, this is still very much a developing area which will require significant due diligence and advice in order for trustees and employers to be comfortable such transfers are in the interests of the scheme members. Given the rapid development of the superfund market and its regulatory framework, we would recommend that trustees and employers considering such a transaction get in touch with their usual Gateley contact for further advice. 

APPT launches new code of practice for sole trustees 


The Association of Professional Pension Trustees (APPT) has launched a new code of practice, the Code of Practice for Professional Corporate Sole Trustees (Code of Practice), which sets out rigorous new standards for professional corporate sole trustees.  

The new voluntary code of practice, which sets out a range of governance and risk controls for sole corporate trustees in order to ensure that scheme members’ interests are protected to the highest level, has been developed by the APPT in conjunction with the Pensions Regulator and is expected to come into force on 1 January 2021. 

The code covers six main areas as follows: 

  • accepting an appointment as a professional corporate trustee; 
  • working with the sponsoring employer (including maintaining independence from the sponsoring employer);
  • decision-making processes; 
  • diversity and inclusion; 
  • appointment and review of advisers and service providers; and 
  • assurance reporting in accordance with “ICAEW Relevant Trustee Supplement AAF 02/07 (TECH 04/13AAF)”.  

The code is expected to be reviewed by the APPT on an annual basis.

Key point: 

Although the code is voluntary, it is expected that it will raise standards across the industry and more sponsoring employers will look towards appointing accredited professional trustees who adhere to the code ahead of those who do not. We would recommend that professional trustees sign up to the new code of practice once in force. 

Do you have any queries regarding the latest developments in pensions law?

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