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Chambers UK Guide 2020 

Pensions Litigation Overview

Litigation involving pension schemes continues to thrive in 2019, giving plenty of food for thought for businesses, trustees and lawyers alike.

The long-awaited court ruling in the Lloyds Bank case makes clear that there is a need to equalise for the effect of unequal guaranteed minimum pensions (GMPs), and looks set to lead to novel approaches to address it. Further court consideration of the ramifications of this requirement will undoubtedly come to the fore in the next few years.

The possibility of switching from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI) for annual pension increases continues to be a hot topic which the industry is watching closely, both in the light of Supreme Court and Court of Appeal decisions in Barnardo’s and BT, but also in the way the government addresses the ongoing use and suitability of RPI as a measure of inflation.

The expanding scope and tougher approach of the Pensions Regulator (TPR) will also ensure it will have a strong presence in how employers meet their pensions obligations and how trustees govern their schemes.

We touch on all of these and more below.

The Pensions Regulator’s widening influence 

TPR continues to practise what it preaches about being clearer, quicker and tougher. There is clear evidence of a willingness on its part to assert its powers, which will inevitably give greater cause for debate between employers and trustees about the funding of pension schemes. TPR wants pension schemes to be treated fairly, with robust funding targets and shorter recovery plans, and appears set in its views that company dividends should not be paid if an employer is unable to support its pension scheme.

In June, TPR was given a further boost by the Court of Appeal’s decision to uphold the financial support direction made by TPR in the long-running Box Clever litigation.

GMP Equalisation 

It was only a matter of time, albeit a very long time, before this particular nettle was grasped by someone, and it was done by the Lloyds Bank Pension Scheme trustees.

While it is true to say the court’s ruling has given some certainty about trustees’ duties to equalise benefits for the effect of unequal GMPs, it has quickly become apparent that the menu of possible methods to implement such equalisation will in itself create further debate and litigation.

The case has also shone a light on forfeiture of pensions when full entitlements are not technically claimed by members. How trustees deal with arguments from members or employers about claims for arrears of pensions and forfeiture is a novel question for many, and much will depend on the specific wording of individual schemes’ forfeiture provisions. Where rules give trustees a discretion, they will undoubtedly come under scrutiny for the decisions they make.

In this respect, the judgment appears at odds with the powers of the Pensions Ombudsman (PO) on the question of interest on arrears of pensions. It will therefore be interesting to see how pension schemes apply interest on arrears and whether the difference in the rates between the court and the PO will give rise to forum shopping by members.

Separately, the court also determined that trustees would not be entitled more generally to rely on a limitation defence under the Limitation Act 1980 where members claim payment from trustees, however late in the day.

Transfers – DB to DC 

Inevitably, there will continue to be a keen focus on the administration of, and rules governing, pension transfers. This focus comes from members, TPR, other regulatory, tax and police authorities, as well as the new Money and Pensions Service.

Prompted by concerns and criticisms arising from the amount of transfer activity targeted at members of the British Steel Pension Scheme at the time of its restructuring in 2017, there has also been the recent publication of a "Joint Protocol" on transfers by TPR and the Financial Conduct Authority.

Perhaps the time may be coming for new legislative restrictions which would limit members’ statutory right to transfer to another occupational pension scheme.

Whilst the level of defined benefit (DB) to defined contribution (DC) transfer activity and the desire to access benefits under retirement freedoms continues to rise, at the same time trustees are under mounting pressure to prevent pension scams on members. This gives rise to a growing tension between members’ expectations on the one hand (i.e. that trustees will administer genuine transfer requests carefully and efficiently) and, on the other, the increased due diligence which trustees must carry out within the given statutory timeframes. Trustees are therefore facing an elevated risk of litigation from across the spectrum, including members who experience delays, members whose benefits are not ultimately transferred because of scam concerns, as well as those who have transferred but who are ultimately disappointed. It is likely that claims for financial loss arising from all of these scenarios will continue to escalate.


There has been, and will likely continue to be, much litigation activity in respect of the inflation-proofing of pensions by reference to RPI. Potential switches to CPI are being considered and questioned both in the courts and before the PO. The dynamics of economic conditions, governmental use of different indices in different circumstances, and the contrasting views of experts in the area all indicate the potential for employers to seek to reduce liabilities by altering the index where there is power to do so.

We have seen informative decisions emerge from the Supreme Court in the Barnado’s case and from the Court of Appeal in the BT case (both in late 2018). But there will almost certainly be more to come, given the subtle differences between the drafting of the rules of many pension schemes and the significant impact any change from RPI could have on members and employers alike.

Claims under the GDPR 

In at least two areas, the risk of disputes involving pension schemes has increased materially as a result of the General Data Protection Regulation (GDPR).

Firstly, the lawful processing of member data requires more robust measures to be put in place to improve security and exposes pension schemes to stiffer penalties from the Information Commissioner. The amount of data typically held and used by pension schemes is vast, and their approach and methods for securing personal data will increasingly come under the spotlight.

Secondly, the new and improved rights afforded to members under the GDPR (such as data subject access requests) place a greater onus on trustees to justify their processing and continued retention of historic personal data.

What next? 

There is much to expect in 2020.

In addition to the areas summarised above, the continued impetus of DB schemes looking to buy out or transfer liabilities, combined with TPR’s desire to flex its muscles, will no doubt result in heated debates about the best interests of members. As part of that, it seems inevitable that uncertainties about the validity of pension scheme documentation or amendments will continue to emerge and require resolution by the courts.