PP Online counts down the top 20 news stories of the year.
1. Lord Flight: Brexit will allow us to dump EU pensions legislation
A Tory peer believes European Union pensions legislation will "fall away" when Brexit materialises and argues London has a bright future.
Lord Howard Flight, a politician with strong ties to the City of London, made the remark at the Association of Member Nominated Trustees' autumn conference on 21 September.
He believes legislation for example around guaranteed minimum pension equalisation and funding of defined benefit schemes to buyout level will not be implemented.
He said: "I happen to think those will fall away because it seems to me to be completely crazy for us to implement a regime which was then going to be unwound a few months later. My expectation is we won't implement them."
2. Chancellor restricts 'most' salary sacrifice benefits in £1bn Autumn Statement raid
Chancellor Philip Hammond has restricted the tax-free benefits offered by salary sacrifice schemes - a move that is set to save the government more than £1bn by 2022.
The chancellor said the restrictions to the salary sacrifice regime would take effect from April 2017 - a move HM Treasury said would mean "most salary sacrifice schemes will be subject to the same tax as cash income".
Although Hammond did not specify exactly what benefits would be included in the move, he said pensions, childcare vouchers, cycle to work schemes and ultra-low emission cars (those with CO2 emissions of up to 75g/km) would be exempted from these changes.
3. British Airways returns to pension deficit as court showdown nears
The combined balance of British Airways' DB schemes returned to a deficit after recording a surplus at the end of last year.
The company, which operates two DB schemes in the UK, saw the funding situation deteriorate by £778m on an IAS 19 accounting basis over the six months to the 30 June.
Overall, the aggregate funding level fell from a £355m surplus to a £423m deficit. The company had last recorded a combined deficit on 31 December 2014, when the shortfall stood at £66m.
The news came as BA prepared to go to the High Court to settle a long running dispute with trustees of the Airways Pension Scheme over a proposed 0.2% discretionary increase above the consumer price index for payments in the 2013/14 financial year.
4. George Osborne expected to announce flat-rate of tax relief in March Budget
Speculation was rife that then-Chancellor George Osborne would use the Budget to announce a flat rate of tax relief. In the end it didn't happen as Osborne unveiled plans to launch the Lifetime ISA instead.
5. BA case: Employers 'will not dare' having recovery plans if trustees win
A victory for trustees in a landmark High Court battle would result in employers being scared to agree to recovery plans, the lawyer for British Airways argued.
Concluding BA's statements on 9 December, Michael Tennet QC said a ruling in favour of the Airways Pension Scheme trustees would have wide-ranging consequences for the pensions industry.
The comments were made on the final day of court proceedings where BA is contesting the APS trustees' decision to award a 0.2% increase - above the Consumer Price Index - in the 2013/14 financial year. The move was made after the scheme was moved from the Retail Price Index.
6. British Airways: Trustees granted members 'gratuitous and unearned' benefits
Trustees of the British Airways pension schemes were accused of trying to grant "gratuitous" and "unearned" benefits to scheme members in opening statements of a landmark trial.
Launching BA's opening statement on 26 October, Michael Tennet QC said the trustees had exercised powers beyond their purpose, and simply aimed to improve the benefits of scheme members.
He said: "It is not the purpose of the trustees of an occupational pension scheme to change the benefits."
7. British Airways: APS trustees felt subject to 'four-pronged attack' and turned on advisers
British Airways' scheme trustees turned on their advisers and put pressure on them to change their advice, the High Court heard.
The scheme's rules dictate that benefit increases should be in-line with an appropriate national index, with reference to an appropriate cost of living index.
Continuing BA's opening statement on 28 October, Michael Tennet QC presented evidence which he said showed the trustees were unwilling to accept advice from firms such as Towers Watson and Eversheds. He added trustees consistently argued and looked for evidence to disprove their conclusions.
8. TPR intervenes after DB scheme was mistakenly converted to DC
The Pensions Regulator intervened to help members of a defined benefit scheme after it was accidentally converted into a defined contribution plan.
Trustees of the DCT Civil Engineering Staff Pension Fund, which closed to future accrual in 2002, mistakenly changed the DB scheme's rules in 2010 to calculate accrued benefits on a DC basis.
The amendment happened despite the scheme's actuary telling trustees it would be "very difficult to switch the scheme...without requesting individual members' consent".
The change meant the scheme's 11 members were no longer all eligible for Pension Protection Fund compensation when the company went into administration in January 2014. At the time, the scheme had £1.1m of assets but had a deficit on a PPF basis.
9. British Airways: Trustees hid benefits increase decision from company and TPR
Trustees of the Airways Pension Scheme deliberately kept their decision to increase benefits by 0.2% above the Consumer Price Index, a lawyer for British Airways has claimed.
Continuing BA's opening statement, Michael Tennet QC said that, despite APS trustees voting twice to approve a discretionary increase in February and June 2013, BA and The Pensions Regulator were left in the dark over the decision.
This is despite specific decisions having been made about the increase, including that the increase would amount to 50% of the gap between the CPI and the Retail Price Index (RPI) at 0.2%.
The trustees of the BHS pension schemes and Arcadia wrote to the Work and Pensions Committee accusing The Pensions Regulator of "misrepresenting facts" in oral evidence - a move that has forced the watchdog to issue a clarification.
In a letter to the Work and Pensions Committee, seen by Professional Pensions, the trustee chairman of the BHS Pension Schemes, Chris Martin, said the trustees wanted to clarify facts they believe were "misrepresented to the committee" by TPR chief executive Lesley Titcomb during her evidence.
Martin said: "Contrary to the implications given during the Oral Evidence Session, the trustees worked openly and collaboratively with the regulator since the Summer of 2014 when certain proposals were put forward to them in relation to the BHS schemes.
"In particular, I would like to make clear to the Committee that the trustees notified and kept the regulator appraised of developments relating to the sale of the company and shared information with the regulator at all stages of the sale process, including joining a meeting on 4 March 2015 with representatives of both TPR and Arcadia at which the sale of BHS was discussed.
The trustees and their advisers also kept the regulator updated in subsequent conference calls and emails (including an email of 10 March 2015) in the days leading up to the announcement of the sale.
11. DB deficit jumps £80bn overnight after Brexit vote
The combined deficit of UK defined benefit pension schemes has hit £900bn following Britain's historic decision to leave the EU.
The data from Hymans Robertson shows how a fall in gilt yields today has increased the value of DB liabilities to £2.2trn.
The total deficit rose from £820bn overnight, nearing the record £909bn that it reached on 11 February.
Financial markets responded dramatically to the result announced this morning, with the FTSE 100 slumping 8.7% on opening. The pound also hit a 30-year low against the dollar with a record intra-day swing.
Long-term gilt yields fell by 0.2% in early trading making gilt prices 3% to 4% higher.
12. BHS scheme advisers and lawyers summoned to give evidence as part of parliamentary inquiries
The advisers to both the BHS pension schemes and Arcadia were among those summoned to give evidence to the parliamentary committees investigating the collapse of BHS.
The Business, Innovation and Skills Committee Work and Pensions Select Committee have announced details of future joint evidence sessions for their separate inquiries into the retailer, which entered administration.
The session on 23 May will focus on the role of advisers and their advice on the BHS pension arrangements and the sale and purchase of BHS - and hear evidence from advisers including Anne-Marie Winton, Ian Greenstreet, Tony Clare, David Clarke, Richard Cousins, Owen Clay and Steve Denison.
On 25 May, the Committees will question the advisers to Retail Acquisitions Limited on the acquisition of BHS.
13. British Airways: APS trustees wanted scheme to be in deficit
Trustees of the Airways Pension Scheme believed it would be a "lost opportunity" if the scheme ran a surplus, a lawyer for British Airways has argued.
In a landmark six-week case in the High Court, BA is suing the APS trustee for its decision to award a 0.2% discretionary increase to members in the 2013/14 financial year. This followed the scheme's move from the Retail Price Index to the Consumer Price Index.
The court has already heard that trustees were inflexible on their belief that the CPI was not an appropriate national index, and that they turned on advisers who warned them against implementing a discretionary increase.
Continuing BA's opening statements yesterday, Michael Tennet QC said trustees were worried that if APS ran a surplus, money guaranteed in the scheme's recovery plan would be transferred to BA's other DB scheme, the New Airways Pension Scheme.
14. Royal London loses appeal on blocked pension transfer in High Court
Royal London lost the right to block a suspected pension liberations transfer in a landmark ruling at the High Court, which could have far-reaching consequences across the industry.
In a judgement on the Hughes v Royal London case on 18 January, the high court overturned a decision by the Pensions Ombudsman, which had last year backed Royal London's decision to not transfer a member's pot.
15. Altmann: I've been vilified and bullied by WASPI supporters
Former pensions minister Ros Altmann said she was bullied by supporters of the Women Against State Pension Inequality (WASPI) campaign.
Altmann told the Telegraph she had faced a sustained and hateful campaign from WASPI supporters since being made pensions minister last year.
She told the newspaper that she was the victim of "incessant tweets and emails, trolling, insults and many swear words" after her email address was given out online.
The WASPI campaign petition to make fair transitional arrangements for women born in the 1950s has attracted support from nearly 150,000 people.
Altmann said: "These women have emailed me horrid and vile messages, such as hoping I get struck down with cancer, that I'm a traitor, a turncoat and that I've sold my soul to the devil."
Altmann said that she had spent her life trying to help people with their pensions and had "never seen a campaign that seems so personal."
16. Webb accuses Chancellor of ‘daylight robbery' over pension tax reforms
Former pensions minister Steve Webb accused the Chancellor of orchestrating a ‘daylight robbery' with his proposals to reform tax relief.
In a report Webb, now policy director at Royal London, warned against replacing the current system with either a pension ISA or a low flat-rate of tax relief for all.
He said this would "steal billions of pounds in tax revenues from the next generation". He also cautioned it would be a "grave mistake" to cut the financial support available for pension saving, as he called for any new system to provide stability and simplicity.
17. BA: Best estimate assumptions would have allowed discretionary increases
Company adviser modelling of the Airways Pension Scheme funding position would have allowed for discretionary increases if adopted, British Airways has admitted.
The revelation came to light during the cross-examination of former pensions risk manager Robert French in a landmark trial at the High Court.
The trustees had carried out their own modelling and adopted a discretionary increase framework (DIF) that allowed for increases even though the scheme was in deficit.
The DIF took into account £500m of recovery plan payments committed to by BA until 2023.
However, French admitted the company's advisers, Aon Hewitt, had found models that allowed for an increase, but said these had never been suggested approaches.
18. Ros Altmann leaves government
Ros Altmann left her role as pensions minister and called on government to radically reform the pension system.
In her resignation letter Altmann said that while she has tried to drive "positive long-term changes on pension", short-term political considerations "exacerbated by the EU referendum, have inhibited good policy making."
She highlighted the need for an overhaul of the tax relief system, which "favours highest earners disproportionately, while leaving lower earners seriously disadvantaged" and an end to the "discrimination against Britain's lowest earners who are forced to pay at least 20% more for their pensions than higher paid earners."
She also highlighted the need for a major review of DB funding and affordability. She said the time is right "to properly consider the issues facing employers trying to support DB pension schemes and the potential use of pension assets to boost economic growth."
19. DWP issues GMP consultation
The Department for Work and Pensions (DWP) issued a consultation on indexation and equalisation of guaranteed minimum pensions (GMP) in public service pensions.
The consultation puts forward three potential approaches to the issue though the document says government is willing to listen to other potential solutions.
The consultation aims to answer two issues:
- How best to avoid the introduction of unequal payments to men and women in the public service schemes that will result from the abolition of the additional state pension (AP). There are legal requirements to pay men and women equal pensions in respect of pensionable service after 16 May 1990, and the old arrangements were designed to deliver equalisation by way of increases to AP.
- Whether, following the introduction of the new state pension, the public service pension schemes should pay full indexation on GMP earned while a member of a public service pension scheme, for someone who reaches state pension age after 5 December 2018
20. Sir Philip Green: I was not in charge of BHS Pension Scheme
Sir Philip Green apologised for the problems experienced by British Home Stores but said he was not responsible for the growing pension scheme deficit.
Appearing before the Work and Pensions Select Committee Green said he was not involved with the pension scheme until 2012.
"The trustees were independent of the company," he said. "I probably only met Margaret Downes (then trustee chairperson) about three times in ten years. I saw her in 2008/9 to understand investment strategy but I was not involved. It was a self-contained team and we were not involved in any way, shape or form."
He continued: "I might have had one or two discussions but I was never involved - maybe I should have been. However, there were substantial fees being paid to advisers. By 2005/6 it was north of £1.5m being paid to advisers but no-one came to us. There wasn't the right communications in place otherwise we wouldn't be here."
WPSC chairman Frank Field challenged Green saying: "Every witness we have had so far has told us you are the guy who calls the shots."
Green countered saying: "I was not in charge of the pension scheme at any point. Why didn't Margaret Downes come to us when we had a surplus to ask us about selling the scheme to an insurer?"
He later added: "There have been some bad mistakes made but trustees should take some responsibility as should the auditor."
