The High Court has held that directors of the sponsoring employer of two pension schemes did not, as trustees of those schemes, owe any fiduciary duties to the employer.
H and W were directors of a company and were trustees of the company’s main and executive pension schemes (the schemes). After H and W left
Defined benefit (DB) pension schemes promise their members a pension for life. However, while one member may live to age 75, another might live to age 95. When working out how much money a DB scheme needs to fund the benefits it has promised members, trustees (or rather their actuarial advisers) therefore have to make an assumption about how long, on average, members will live – a longevity assumption.
If that longevity assumption proves to be incorrect and the scheme has to pay benefits for longer than expected, the trustees will need to find additional money to fund those benefits. And usually they will look to the scheme’s sponsoring employer for that money.
Finding ways of managing a scheme’s longevity risk is therefore beneficial for both the trustees and the employer. One way of doing this is a transaction called a longevity swap. Between 2009 and 2018, nearly 50 pension schemes entered into longevity swaps, including schemes sponsored by Astra Zeneca, AkzoNobel, BA, BAE Systems, BMW, BT, Heineken, ITV and Rolls-Royce.Continue Reading Managing pension scheme longevity risk – a good thing for schemes and employers
You may have seen recent – sensationalist – media headlines like:
“’We’re coming for you’ – Amber Rudd’s warning for bosses reckless with employee pensions” (ITV News)
“Reckless bosses who put workers’ pensions in danger could be jailed for seven years” (The Mirror)
“Seven-year jail terms unveiled for pension fund mismanagement” (The Guardian)
The
Employers and trustees who use a guarantee or charge to reduce their pension scheme’s Pension Protection Fund (PPF) levy may need to re-execute that guarantee/charge in order for it to be taken into account in calculating the scheme’s 2019/20 PPF levy.
The PPF provides protection for members of DB pension schemes whose sponsoring employer becomes insolvent. It is funded in part by an annual levy payable by DB pension schemes.Continue Reading Pension Protection Fund levy – re-execution of contingent assets required
The High Court has held that pension schemes are required to equalise benefits for the effect of guaranteed minimum pensions (GMPs) accrued between 1990 and 1997. The Court also considered a number of possible equalisation methods.
It held that the employer could require the trustees to adopt the cheapest method.Continue Reading GMP equalisation – an increase to DB pension scheme liabilities