Alerts

Focusing on breaking news

• Default retirement age of 65 - here today, gone tomorrow?

  The eagerly awaited High Court decision in the Heyday case was published on 25 September 2009. The case centred on a challenge to the legality of provisions in the Employment Equality (Age) Regulations 2006 which allow employers to dismiss employees aged 65 or over by reason of retirement. It also means that an employer has ready justification for not recruiting someone of that age. The European Court of Justice (ECJ) found that the UK`s default retirement age (DRA) could be objectively justified as a matter of national law. It was then up to the High Court to determine whether the Government`s basis for introducing a DRA of 65 was supported by a legitimate aim.

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• Once more unto the employer debt breach

  In response to industry concerns that the employer debt legislation unnecessarily inhibits corporate activity (a concern also voice by the Deregulatory Review), the Department for Work and Pensions (DWP) has published a consultation setting out proposed easements when businesses restructure. If implemented, the consultation and accompanying draft regulations will result in further changes to the Regulations, which were the subject of substantial amendments as recently as April 2008. The proposals aim to reduce the circumstances in which a corporate restructing (namely, an internal reorganisation) will trigger a debt in a defined benefit (DB) pension scheme. However, they will only apply in limited circumstances.

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• Finance Act 2009 - this time it's personal

  This year's Finance Bill received Royal Assent on 21 July 2009. The new Act brings into force new tax relief restrictions on pension savings for high earners, which were announced in the Budget on 22 April 2009. Firstly, from 2011, individuals with an annual income of £150,000 or more will face a reduction in their tax relievable pension contributions. Relief will be tapered away, so that for those earning over £180,000 it will be worth 20% (equivalent to basic tax rate). Secondly, transitional measures take effect from 22 April 2009 to prevent affected individuals from taking advantage of available tax relief in the interim by making significant additional pension savings. Whilst the Treasury anticipates that these measures will protect an estimated £2 billion of tax, they may also have unintended consequences for existing arrangments.

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• Finance Bill 2009 - limited relaxation of transitional provisions

  On 22 April 2009, Alistair Darling surprised the pensions industry by announcing that, from 2011, the country's highest earners will no longer benefit from tax relief on all pension contributions at their marginal rate. The Government's proposal is to restrict the tax relief available for individuals with an annual income of £150,000 or more. Relief will taper away so that it is orth just 20% for those earning over £180,000 (equivalent to basic rate tax). Transitional measures were also announced which, from noon on Budget day, prevent affected individuals from making significant additional contributions in the interim. However, recognising that the transitional measures are fraught with complexity and have the potential to scupper many existing arrangements, the Government has this week responded to industry concerns by making limited amendments to a couple of the more draconian aspects of the Finance Bill 2009.

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• Trivial commutation regulations published!

  Although the Budget 2009 has been grabbing the headlines, promises made in last year`s Budget to ease the administrative burden on occupational pension schemes are finally coming into fruition. Coming into force on 1 June 2009, the Registered Pension Schemes (Authorised Payments) Regulations 2009 will extend the list of "authorised payments" which can be made from a registered pension scheme.

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• Material detriment code revisited

  Largely, in response to fears that the Pensions Regulator's (TPR) anti-avoidance powers were not sufficient to tackle risks posed to members' benefits by "new business models" and the like, the Pensions Act 2008 expanded TPR's armoury. A significant addition was the power to impose contribution notices, in certain circumstances, where a party's action or failure to act has a materially detrimental effect on the likelihood of members receiving their benefits (the "material detriment test"). As part of a number of safeguards on the use of this new power, TPR must produce a code of practice setting out the circumstances in which it expects to issue contribution notices on the basis of the material detriment test. This code was issued, in draft, for consultation in December 2008. On 5 May 2009, a response to the consultation was published together with a revised draft of the code.

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