Hello and welcome to this client update hot topics webinar. This is a webinar and podcast version of the hot topics session from our recent client update seminar. I'm Ian Curry and I'm a member of the Pensions Team here at Wragge Lawrence Graham & Co.
In this webinar we'll be covering some of the main issues with respect of pensions in the last six months and that means we'll be covering the summer budget, pension policy changes, VAT on professional advice, a recent ECJ ruling and the impact on safe harbour and data protection.
The PPF levy consultation and draft determination for 2015/16, the ban on member borne commission payments, refund of surplus issues also known as Section 251 and rounding off with a case law update.
So summer might seem like a very long time ago. As I make this recording I'm looking out over a London scene that's cold, drizzly with grey skies ahead, lots of people wearing overcoats, umbrellas, hats. So, winter is very much here and summer might seem like a very distant memory, but for pensions people there is still something that's left over from summer.
Summer Budget 2015
The Summer Budget 2015 is having an impact on how we administer pension schemes. There were lots of things that were announced in the Summer Budget. There was a tweak that corrects some of the issues on the taxation of death benefits.
There was confirmation of the delay for the secondary annuity market until 2017 with the announcement that Pension Wise, the free pensions advice service, would be made available for the over 50s rather than just the over 55s as previously and there was confirmation of the consultation on the future of pension taxation which we imagine will report in the next budget in 2016.
The two items that we'll focus on are the tapering of the Annual Allowance and the alignment of Pension Input Periods to the tax year as these are the two things that are having most impact here today on pension schemes.
Tapering of the Annual Allowance
So focusing on the tapered Annual Allowance and this is part of the Government's attempt to limit some of the tax advantages of pension savings for those individuals that it considers to be high earners.
So taking a step back, the Annual Allowance is the limit on the amount of tax relief savings an individual can make in any given year and that year is based on the Pension Input Period that before these changes was scheme specific.
The current Annual Allowance is £40,000 and the way that the taper reduction will work is that £1 of Annual Allowance will be reduced for every £2 that's earned above £150,000. This is up to a maximum reduction of £30,000 so even the highest earners should still enjoy £10,000 of Annual Allowance for tax relief to pension savings.
So who does it affect? So it wouldn't be a change in pension's legislation or pensions tax if it didn't introduce a whole new raft of vocabulary and defined terms into the language. This one brings at least two into pension's world.
The first is the Adjusted Income. An individual has to have an Adjusted Income of more than £150,000 and we'll come onto what that actually means in practice in a moment.
There is also an exemption mechanism for individuals who have Threshold Incomes that are less than £110,000. An individual has to have a Threshold Income of more than £110,000 to be effected by the tapered Annual Allowance so someone who has less than £110,000 of Threshold Income they should in theory be exempt from the impact of the tapered Annual Allowance.
So what does Adjusted Income mean?
Income is a wide definition taken from the tax legislation; it includes a whole range of things including taxable benefits, so it's a lot broader than just looking at the amount of money that goes into an individual's bank account on a monthly basis.
It also includes an employer's pension contributions and the member's pension contributions. So a potentially very wide definition for Adjusted Income which might mean that some individuals who wouldn't otherwise of thought that they did earn above £150,000 when you look at the full package of their benefits it might be brought into this bracket.
And what about Threshold Income?
That's a narrower definition of income and it acts as a floor so that earnings below a £110,000 are excluded. This has been designed so that if an individual earns below £110,000 but has the benefit an old generous pension settlement then they're not overly penalised by the introduction of the tapered Annual Allowance.
The intention of the legislation was not to penalise someone for example who was earning £90,000 but who had a particularly generous salary sacrifice pension arrangement in place but would otherwise have brought it into the scope of the tapering regime.
So if an individual does have Threshold Income that's below £110,000 they will be excluded from the impact of the tapered annual allowance. That's except if there is a new salary sacrifice arrangement an obvious avoidance mechanism would be to sacrifice your salary below the £110,000 Threshold Income floor.
So the exception to the exception is that if you enter into a new salary sacrifice arrangement either on or from 9 July 2015 that would be disregarded for the purposes of calculating Threshold Income, so there's no way of avoiding it by taking action now.
I think this makes a lot more sense, certainly for me, if I look at a few worked examples. So take this individual who has an Adjusted Income of £180,000, it might be that he has a base salary of £140,000, a range of benefits that add another £10,000 and a combination of employer and member pension contributions that take him up to that £180,000.
His income above the threshold of £150,000 is therefore £30,000 and even my simple mathematical ability will help me say that £30,000 divided by two is £15,000 so if the taper applies for a £1 reduction for every £2 earned above the threshold then the Annual Allowance of £40,000 is lowered by £15,000, so 30,000 divided by two, leaving an Annual Allowance for this individual of £25,000.
Moving onto someone who earns more. This is an individual who earns £210,000, so they have an income above the threshold of £60,000. This individual would have an Annual Allowance of £10,000 and we work that out again by dividing the income above the threshold by two, so 60,000 divided by two is 30,000 and taking the 40,000 Annual Allowance and reducing it by the taper of £30,000 leaves £10,000 of Annual Allowance and I've written on the slide £210,000 and above and that's just to go back to that point that the maximum reduction in Annual Allowance is £30,000 so even if this individual was earning £300, £400 or £500,000 then their Annual Allowance would still be 10,000, the maximum reduction would be £30,000 so they still would still have a quarter of their Annual Allowance left.
Let's just move on to someone who might benefit from the Threshold Income floor. This individual has an income of £90,000 but they entered into a salary sacrifice arrangement in 2012 but took their salary down to £90,000 and that salary sacrifice is worth £70,000 so previous to that their income had been £160,000.
So this individual the threshold will apply. The threshold restriction only applies to new salary sacrifice vehicles entered into on or from 9 July 2015. So in this example the threshold would apply and full Annual Allowance of £40,000 would be available for the individual.
Just contrast that with someone who enters into the same salary sacrifice arrangement but in September of this year and their income of £90,000 after the salary sacrifice of £70,000 actually equals an Adjusted Income of £160,000 so the Annual Allowance taper is calculated by looking at the excess over £150,000 and £90,000 plus £70,000 equals £160,000 the excess over £150,000 is therefore £10,000 and so their Annual Allowance if we apply the two for one ratio is reduced by £5,000 leaving this individual with £35,000 of Annual Allowance for their pension.
In order to make the new tapered Annual Allowance regime work within the context of the tax system the Government also had to propose the alignment of Pension Input Periods with the tax year.
Alignment of Pension Input Periods with the tax year
Pension Input Periods are a period of one year which previous to this change was defined by the scheme so that year might run from calendar from 1 January to the end of December it might be the anniversary of the establishment of the scheme it might run in line with when the scheme prepares its annual accounts or any other measure.
The introduction of an aligned Pension Input Period required a transitional period so that all Pension Input Periods could become aligned with the tax year. How the Government made this work was an announcement that all open Pension Input Periods would close with effect from 8 July 2015.
So regardless of how long that Pension Input Period had been open it would close with effect on 8 July 2015 so that Pension Input Period might have been open since the start of January or alternatively it could have just been open for a few days.
All schemes would then start with an new interim Pension Input Period opening on 9 July 2015 and running to the end of the current tax year, so until 5 April 2016. That then allows us to have the first fully tax aligned Pension Input Period running from 6 April 2016 until 5 April 2017 and then the second tax year can run from 6 April 2017 and on and on.
That means that Pension Input Periods from next year will always be aligned with tax years which should at least bring a degree of simplicity for pension administrators. The key dates for the alignment of Pension Input Periods are outlined on the slide that's available on the webinar version of this update.
Changes in focus in government pensions policy
The pensions minister, Baroness Altmann, announced a changed pension's policy or a change in focus on pension's policy. It was a deft application of how to manage a 'to do' list. Some of the things that have landed on the pension minister's desk on previous administrations have been shelved or kicked into the long grass so that means that Baroness Altmann has managed to clear defined ambition, collective benefit and pot follows member from her list of things to do.
The focus of the Department for Work and Pensions in respect of occupational pension schemes is now going to be on the successful introduction of workplace pension reform and automatic enrolment for very small employers and also ensuring that pension flexibilities work and that the market is working for pension savers who are trying to take advantage of pension flexibilities.
VAT and professional advice
Moving on now to the reclaim of value added tax and this is an issue that has been rumbling on for a long time now. There is still no definitive answer to any of the questions that have been raised by practitioners on the ability of employers to reclaim value added tax for money that is spent on advising pension schemes on investments and day to day management. So the overall question if we just remind ourselves of what the main issue is, is whether employers can reclaim VAT in relation to third party services provided to pension schemes.
The question then becomes who actually receives the services provided to the trustees of the pension schemes. Is it actually provided to the employer, does the employer actually benefit from these and if so what does that mean for the ability of the employer to reclaim value added tax.
There is a nuance on this in that the VAT position as understood by HMRC a couple of years ago was that employers would be able to recoup VAT on management advice which was a term that looked at the day to day scheme management, but was also broader than that and covered a whole range of things that would fall outside the scope of day to day scheme activities but would not be able to reclaim it in respect of investment advice.
This then became distilled down into a practical and workable solution which was known as the 30/70 split. So if trustees received invoices for reclaiming VAT from third party service providers and these invoices had not been split out into separate amounts for investment advice or management advice primarily because it was very difficult to split out the amounts because the two areas overlapped and it wasn't particularly clear what constituted which type of advice.
HMRC's workable solution was to have a 30/70 split whereby 30% of the invoice would be reclaimable for VAT by the employer and that was all fine until a European case in PPG Holdings BV which looked at overall the ability of employers to reclaim VAT in respect of expenses for pension schemes and that case had potentially all amounts were redeemable against VAT but subject to the first principles that you had to look at who actually received the benefit of the services and go back to basics on what actually was reclaimable.
At the last hot topics update we noted that the 70/30 split would end on 31 December of this year so in just a few weeks' time and that it was important that trustees liaised with advisers and employers to assess the extent to which VAT was recoverable and to determine whether changes were needed to maximise recovery.
There remained an absolute plethora of uncertainties as to what types of services were covered so different professional services such as legal and actuarial and what happened in respect of highbred and defined contribution schemes.
We noted that more HMRC guidance was expected in the summer and that update was pretty simple to update for this hot topic seminar the 70/30 split will now last until 31 December 2016 so we've been given an extra year period of grace.
Basically HMRC has recognised that the issue is far more difficult than it might at first thought after having consultations with industry individuals and employers and representatives is has promised more guidance which would deal with some of these knotty issues.
They've promised this later this year but we're now running out of time in December so it will be interesting to see if this does come out in December or if we actually see this in the first quarter of 2016.
HMRC has considered some of the areas where this issue can be dealt with, what would be acceptable to HMRC as a method of dealing with the issue of reclaiming VAT. How can employers demonstrate that the services were provided for the trustees actually provide a benefit to the employers?
One solution is to have tripartite contracts whereby the employer the trustees and the third party service provider enter into the three-way contract that stipulates exactly who benefits and is very clear for the purposes of HMRC. There were a number of issues that remain to be worked through on this.
Principally some of the conflict of interest issues if the service is being provided to the trustees then what exactly in terms of duties is owed the employer as a part of that contract. Another fly in the ointment which was raised by HMRC in its recent announcement was that this might have a negative impact on the employer's ability to set off these costs to corporation tax.
So it might be a case of being in a position to reclaim VAT costs by having a negative impact on corporation tax which is something that employers will want to avoid. Another potential solution was that the employer would pay the trustee directly for providing it with the administration services which allow it as an employer to offer pension benefits to its employees. The trustee could then either provide the services directly or subcontract to administrators but the employer is still directly paying for the service under a direct contract with the trustees.
This presents some of the same issues in terms of duties between the trustees and the employer and also does it place the trustees in an impossible position by having the trust law obligations to beneficiaries and then also contract law obligations to the employer in terms of the carrying out of administration services.
Another solution that's been proposed and this one will only work for corporate trustees is the idea of being part of the VAT grouping of the main employer. Employers that are part of groups often have a VAT grouping whereby VAT that is reclaimable across the group of companies is reclaimed under one single VAT grouping and so if the pension scheme trustee company was part of that grouping would the employer be able to reclaim under that as part of the group reclaim and that seems like it might be a neat solution.
A major fly in that ointment is that the responsibility for VAT payments under a VAT grouping is joint and several and that means that all of the companies that are part of the VAT grouping are potentially liable to pay the VAT costs of other members in that VAT grouping and that might be fine if you're part of a connected group of companies where that's fully understood. It's not so fine if you're a trustee and holding trust assets on trust on behalf of the beneficiaries, it's difficult to see how trustees would be able to sign up for that at the risk of alienating trust property that it wouldn't be able to use to pay for the VAT bills of other companies.
One final solution that was proposed by some in the industry was updating trust deed and rules to make it very clear what services were being provided and that the employer was benefitting from their services.
HMRC has said that it does not believe that is an appropriate solution or one that would be acceptable to it for the reclaim of VAT. So that just leaves us with the three other possible solutions all of which having quite a lot of issues with them that need to be worked out so for the most part if employers and trustees are able to sit tight and wait for the guidance that will come out at some point from HMRC then employers should do that.
Obviously if it needs to take action typically because of a transaction that requires crystallisation on this point then we can give advice on the best next steps but where possible employers should just sit tight and wait for further guidance.
Data protection and the ECJ's ruling on 'safe harbour'
Moving on now to data protection and the question of whether a safe harbour can become unsafe by way of changes in legislation. The ECJ has been looking at the issue of transfers of data from the European Union to the United States of America and this is part of a case that was brought by a data protection activist against Facebook in Ireland claiming that the transfer of data from the Irish servers back to the parent company's American servers was a breach of the data protection provisions in Ireland.
In the United Kingdom data protection is covered by the Data Protection Act 1998 and the basic provision is that personal data shall not be transferred to a country outside the European Economic area unless that country has an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.
The 'safe harbour' was something that the European Commission had agreed with its counterparts in America whereby a company could sign up to say that it did comply with those requirements and that transfers to those companies would then be safe harboured confirming that complied with European data protection requirements.
The courts took another look at the data protection regime in the United States in particular against the back drop of revelations made by Philip Snowdon issues around the NSA and the monitoring of web based communications and decided that the United States current legislative regime could not afford the level of protection that was sufficient to allow transfers of data to go ahead without further protections.
So why is this issue so relevant for pension schemes? Well data protection in general is relevant for pension schemes. One particular area in this case is that there is wide spread use of safe harbour amongst people and sometimes that's used without even necessarily knowing about it. Many individuals use web based services whether that's email, document management or meeting systems and they might not be very clear as to where in the world that data is housed.
The United States has approximately half of the world's data storage capacity with Europe catching up slowly in the amount of data storage that its servers can host so the chances are that a number of services are provided on servers that are based in the United States and that's even if the provider the company that you actually use is not an American company.
The data protection regime in Europe is also about to be tightened up with the introduction of new data protection regulations which are very likely to feature far more severe sanctions. The sanctions that are being proposed by the European Parliament include fines of up to €1 million or up to 5% of the annual turnover of an entity which ever amount is greater.
So that's certainly something that's going to concentrate attention amongst financial directors in Europe and raise data protection in the order of priorities and issues facing general counsel.
Of course pension schemes have a plethora of personal data on scheme members so obviously they have personal data such as bank account details, date of birth and names but they also have some really sensitive data on individuals with ill health complaints or with changes to family circumstances so that kind of data is within the type of data that the national regulators of data protection are particularly keen to see protected.
In the UK the Information Commissioners Office is the national regulator and the deputy information commissioner has so far said that he is fairly relaxed about the impact of the case and this contrasts with some of his colleagues across Europe notably Germany have taken a far stronger line. To boil down his message to keep calm and carry on might seem a bit glib but he certainly has been quoted to saying that the doesn't believe that there will have to be major changes to the way most companies and individuals do business as a result of the judgment.
It's also worth noting that all of the national regulators have agreed to standstill on taking any action for breach under the new position following the ECJ judgment until at least the end of January 2016. So that at least gives trustees and companies a bit of time to look at agreements that they have in place and decide whether they need to take any corrective action.
So what should trustees actually do and this is just a series of practical points that trustees can take to deal with this issue and also some of these are practical tips on data security that trustees should consider regularly and this is in line with the pension regulator's promotion of data security and the accuracy and up to date requirement for scheme data.
So the first point is that trustees can review contracts with third party administrators and other advisors most trustees rely heavily on third party service providers and it's worth looking at the contracts that are in place to see if data protection is covered. In quite a lot of those contracts there is provision that the provider will comply with the Data Protection Act 1998 and specific provisions on the transfer of data including coverage of in what circumstances data might be transferred outside of the European Economic area.
So it's worth reassuring yourself that those provisions are in place. Secondly, trustees can review internal policies and processes on the transfer of personal data so what are they routinely doing in terms of the transfer of personal data and one thing to bear in mind and is worth considering is that a lot of trustees use web based email just like most of the population does but just to consider whether this is the appropriate medium for transferring any information about sensitive data and to the extent that that information can be protected by encryption or anonymisation.
Trustees might want to consider the European data transfer model contract although it might be difficult to get any traction with third party providers around adopting that.
It's certainly one to think about although in our experience it's not necessarily been something that third party providers are willing to sign up to and finally the data best practices which as I noted are things that not only the Information Commissioners Office would recommend but also the Pensions Regulator are to ensure that scheme data is:
- accurate;
- up to date,
- where possible encrypted; and
- that you consider anonymisation
so if you're sending information to a service provider does it need to include all bells and whistles and all information about a member or can you strip down to just things that mean that the member would not be identifiable if there was a leak of that data.
PPF Levy and determination
Moving on now to the pension protection fund and the draft determination for the levy for 2015/2016. The PPF has announced that the levy for the next year will be £615 million. It has proposed no major change to its approach to calculating individual employer payments.
That's as expected. There was a major change last year and the PPF runs in a three year cycle so we wouldn't expect any major changes this year hopefully not next year either before it assesses once again whether it has the most appropriate method for assessing individual employment payments. So just to look at a few issues that have arisen from the draft determination that are worth taking note of.
The first is that the PPF have clarified that it will be reinvoicing schemes that have incorrectly identified themselves as last man standing schemes. Those schemes will be required to pay the difference between what they actually paid and what they should have paid if they had correctly identified themselves as being not last man standing schemes. It's not clear when that reinvoicing will take place we haven't had any word from the PPF as to what that process will be and whether there will be any mitigation or appeals process but that is coming down the tracks.
On asset backed contributions some good news that the PPF will allow a light touch approach to recertification of ABC documentation so where there's not been any material change that will allow updated evaluations, updated legal opinions and so entirely new documentation will not always be required.
Something that hit the headlines whilst many of the deadlines for submissions to the PPF will be shifting to midnight at the end of 31 March 2016 this is opposed to 5.00 pm on 31 March will be familiar to people in the industry who might have had last minute rushes down to Croydon to make sure that documents are flung the door of the PPF before that deadline.
So that's handy if you're pushed against that deadline that you do have that extension but it's worth noting that that shift to midnight won't apply to other deadlines that are still 5.00 pm on the relevant date so for deficit reduction certificates which are due on 30 April 2016 that deadline is still 5.00 pm and for block transfer certification on 30 June 2016 that is also still 5.00 pm.
It's also worth noting that there won't be any support either physically or online form the PPF after 5.00 pm on that deadline date so our advice to clients is to make sure that documentation is submitted well in advance of the deadline and certainly if possible in advance of 5.00 pm in case there are any last minute issues with submission.
Member-borne commission payments
Moving on to member borne commission payments the introduction of a ban on member borne commissions and timings for this ban. So this is where members have to pay commissions for advice and this is baked into products that they receive.
There will be a ban on these sorts of payments for any new arrangements from 6 April 2016, any existing arrangements that feature these sort of commission payments the ban will be introduced at some point later in 2016 but we don't have a precise date for that.
So what sort of schemes will be affected by this ban? This is on effectively defined contribution arrangements so money purchase occupational pension schemes that are used for automatic enrolment purposes also money purchase benefit in non-money purchase pension schemes and also AVCs in qualifying occupational pension schemes so the AVC sections of DB schemes that are also used as qualifying occupational pension schemes.
What's not clear yet is to who the duty to prevent payments will fall on. One option is that it falls on the trustees that they will have the duty to prevent payments. Another option is that it the service providers themselves will have to prevent payments presumably by not offering those products any more. Another option might be to make both entities have the duty to prevent payments and we will update you as soon as we have that information.
Section 251 resolutions and refund of surplus to employers
So moving on now to the refund of surplus to employers. Something that is also known as a section 251 issue. This is the refund of surpluses to employers and provisions in section 251 of the Pensions Act 2004. The Pensions Act 2004 said that any powers to refund surpluses to employers would fall away would no longer be useable unless the trustees passed a resolution in the form described by the legislation by 5 April 2016.
Now that's a date that had been put back a few years initially and seemed a very long time away for most people and it's now rearing up to be only a few months away. So the deadline for passing resolutions is 5 April 2016.
But the real deadline for taking any action is 5 January 2016 and that's because the trustees are required to issue a notice to members in the form prescribed by the legislation to give members three months' notice before they pass any resolution under section 251.
So if you haven't considered this issue and there's quite a few things to consider as to whether you should pass such a resolution and what action you should take then you need to do that pretty quickly because the notice to members has to go out no later than 5 January 2016 to enable you to take a valid resolution on 5 April 2016 at the very latest.
Case law update
O'Brien v Ministry of Justice; Walker v Innospec (Court of Appeal)
Finally moving on to our case law update, just a couple of cases in our case law update this time. The first is the joined case of Walker and O'Brien.
At first blush this looks like a case about part time workers' rights and the right to a coup in a final salary pension scheme and same sex civil partnerships or marriages and survivor benefits that individuals should accrue in final salary pension schemes.
But when you combine those two together you see that they are broadly about pension scheme liabilities following changes to discrimination legislation, effectively when should people be liable to pay benefits following changes to legislation.
So let's have a look at the two individuals and what brought them to the courts.
Mr O'Brien worked as a part time recorder in the court service started to work on 1 March 1978 and worked right the way through to 31 March 2005.
7 April 2000 was the effective date of the part time works directive the European Union Legislation providing for equal and fair treatment for part time workers as opposed to the full time equivalents. The UK didn't pass its enabling legislation until after this date for the court's purposes this is the effective dates when the legislation should have come into force and so that's the date that they were considering.
Mr Walker joined Innospec and the final salary pension scheme that it offered in January 1980 and worked for them until 31 March 2003.
A little bit later on 5 December 2005 the Civil Partnership Act came into force which provided amongst other things that same sex civil partners would have rights to survivor's benefits from the effective date of that legislation so from 5 December 2005.
So the issue for the courts to decide was whether in the case of Mr O'Brien he should have been able to join the pension scheme on a part time basis and rights under that pension scheme for the whole period of his service, so from March 1978 until March 2005 or only when the legislation should have changed, so the effective date of that part time workers directive so from 7 April 2000 and for Mr Walker should he have or should his surviving spouse or surviving civil partner have any rights in respect of his membership of the final salary scheme from 1980 to 2003 or should there be no rights because the actual legislation only came into force after Mr Walker had left employment with Innospec and finished accruing benefits in the pension scheme.
The courts decided the latter interpretation was correct so in the case of Mr O'Brien he would only be able to enjoy the benefits of membership of the pension scheme on a part time basis with effect from the effective date of the part time workers directive, so 7 April 2000 and Mr Walker and any surviving civil partner would get no benefits in respect of Mr Walker's membership of the Innospec pension scheme during his membership during 1980 and 2003 because all of this was benefit accrued before the effective date of the Civil Partnership Act 2005.
So it's quite useful to note that that decision applies to all final salary occupational pension schemes. It wasn't limited on its facts to the specific arrangements in question the key point is that there is no pension liabilities for service before the effective date of changes to legislation in terms of changes on discrimination legislation and so that provides clarity over the extent of pension scheme's current liabilities and legal certainty that current accrual will not give rise to future and unanticipated liabilities. Perhaps as importantly it creates no additional financial burden for employers.
A take away from that is that the case may be appealed, this was a Court of Appeal case so the logical next steps is that the joint case will be appealed to the Supreme Court especially because of the importance of the issues that are raised we will keep you updated on that as long as there are any developments.
Buckinghamshire v Barnardo's
Moving on to the final case and the final update in this session. The case law update finishes with a look at Barnardo's and Buckinghamshire County Council and this a case of employers wanting to change the way that pension revaluation is calculated.
A lot of employers wanted to take advantage of the Government's shift from calculating its own revaluation and pension increases by reference to the consumer prices index or CPI rather than the retail prices index or RPI.
That change is not an automatic change schemes have to look at their rules to see whether the rules permit such a change and if not whether such a change can be made and obviously trustees have been faced with employer requests to make changes because of the perceived savings that the employers can make.
In this case Barnardo's asked its trustees to change from RPI to CPI for the purposes of revaluing deferred pensions and for calculating pension increases. The trustees looked at the rules and they didn't think that they necessarily had the power to allow such a substitution and so the whole thing went off to the courts to get their view as to what was permissible.
The courts looked at the wording in the trustee deed and rules very closely and focused on the word replacement and they decided that the Government had not replaced RPI with CPI. RPI was still being published by the Office of National Statistics as an official statistic.
It had been downgraded from being a national statistic but that was far from being replaced as would seem to be required by the court reading of this rule and so the court said that the trustees did not have the power to substitute that might be quite different if the Office for National Statistics decides to discontinue publication of RPI as an official statistic but for the purposes of Barnardo's that wouldn't be possible at the moment and more broadly for people looking at RPI and CPI issues it just reiterates the importance of looking in fine detail at the words in the trustee deed and rules and working out exactly what powers they give to employers or trustees.
Thank you for joining me for this hot topics update. We'll be back in 2016 for another round of client update seminars, webinars and podcasts.
If you've got any questions on anything raised in this update, please contact me, Ian Curry, or any of your regular client service team. I hope you have a very happy Christmas and look forward to speaking to you again in the New Year.