Sometimes employers come to the pensions party unsupported by sufficient legal advice and may seek to rely on non-specialist advisers or even on trustees’ own retained advisers.
Unsurprisingly, we strongly advocate dedicated, specialist legal support for employers and other scheme sponsors across a wide-range of issues. In our experience, high quality legal advice at a critical juncture can not only ensure the achievement of your business aims, but potentially save significant costs and reduce your risk exposure. On these pages, we illustrate just some of the services that we provide to employers and pension scheme sponsors, but should you have an enquiry on a topic not covered here, please do not hesitate to contact us.
The introduction of ‘auto enrolment’ from October 2012 imposed a whole new set of pension requirements, requiring all employers of any size to put employees into a pension scheme and make contributions in respect of them.
The requirements, rolled out between 2012 and 2017, covered the largest employers first, with smaller employers – including private individuals – commencing during the later stages. For most employers, it is not the cost of contributions which is challenging so much as the administrative complexity involved. The team at Arc Pensions Law has been advising on auto enrolment since its inception. Whether it is to support you in your advice to a client, or to help you understand how auto-enrolment impacts your own firm, we can guide you through the challenges such as:
- Who should auto enrol? The rules around identifying the relevant employees are very complex and may need to be tailored for each business.
- How much money can and should be contributed? There is a range of options and we can help you pinpoint what would work best for different make-ups of workforce.
- Where should the contributions be made? With our help, you can go through the right process and protect against problems from employees objecting to the choice made.
- What should employees be told? Communications can be the key to successful auto enrolment, and we can provide clear and complete communications that comply with the legal requirements whilst ensuring that employees understand what is happening. Whether you have been operating pension schemes for years or are a novice in the area, our helpful, pragmatic assistance will ensure that you navigate the auto enrolment requirements effectively and successfully.
Since the mid-2000s, businesses have had to be aware of the effects of normal business activity on their defined benefit pension arrangements.
Even the most standard commercial activity might affect the next valuation or give rise to demands for additional funding from the Pensions Regulator. Pensions law and regulation can seem ubiquitous and overly restrictive for corporate groups. These rules can apply to apparently unrelated acts, such as:
- intra group reorganisations of assets
- dividend payments
- refinancing or increasing lender security
- acquisition of business, and
- guarantees of obligations of the group or other companies.
Arc Pensions Law can provide the practical advice you need to ensure that your business does not fall foul of regulation. With extensive experience in this area, we can ensure that the most productive approach is taken and that your business is not unduly affected by legal requirements. We can guide you through the planning stage, assist in engagements with the Pensions Regulator or scheme trustees, and generally minimise the time and cost of pensions regulation to the management of your business.
Recent years have seen a significant growth in defined contribution (or ‘money purchase’) pension schemes, accompanied by increased regulation relating to management.
We advise employers on strategies and issues in managing defined contribution schemes. Our team of experts can assist with:
- management of occupational (trust based) pension arrangements
- working with GPP providers and master trusts
- communicating with employees
- dealing with salary sacrifice arrangements
- proper process for selecting funds including default funds, and
- strategy for dealing with changing tax treatment (annual allowances, life time allowances and 2015 Budget ‘freedoms’)
Discrimination law has caused problems for pension schemes ever since 1990, when schemes were required to ‘equalise’ pensions for men and women, providing them with the same standard retirement age.
It took almost 20 years for the courts to clarify requirements and the solution still necessitates careful legal analysis. Since then, there have been further rules on discrimination relating to:
- part-time worker status, and
- sexual orientation and marriage/civil partners.
Dealing with discrimination risks requires an understanding of a range of issues, from the use of comparators to objective justification. Issues are rarely straightforward – improving benefits for one group may be discriminatory against another. Arc Pensions Law can ensure you navigate these issues in a practical and appropriate manner.
Employer Advisory Work
Employers can no longer rely on advice provided to trustees on managing their pension scheme issues.
As costs of pensions and trustee powers have increased, advice to trustees has become more focused on their interests rather than those of the employer. Employers need their own advisers so that they can make informed decisions on a range of pension issues such as:
- proposed changes to scheme documents
- use of employer powers and discretions under the scheme rules
- negotiation with trustees relating to scheme funding
- provision of non-monetary assets to the scheme, such as guarantees and asset-backed contributions
- notification of corporate events to the trustees and even the Pensions Regulator, and
- dealing with disputes raised by employees about their pensions rights.
We aim to develop good working relationships with trustees’ advisers, ensuring that practical solutions are found, avoiding disputes or litigation where possible. We believe that the employer is best served by realistic advice and sensible negotiations. We look to protect interests, whilst ensuring that issues are not simply buried and liable to cause problems in the future. We pride ourselves on our knowledge of business and commercial concerns. Our clients do not wish to deal with technical lawyers who do not understand the ‘real world’ needs of business. We combine our technical expertise with an understanding of practical interests and advise accordingly.
Employer Debt and Section 75
One of the biggest practical challenges for a business that sponsors a defined benefit pension scheme is the risk of inadvertently triggering a due debt.
Simple business and restructuring activities such as individuals retiring or leaving can give rise to an immediate debt due under section 75 of the Pensions Act 1995, calculated on the highly costly ‘buy-out’ basis (the cost of securing annuities for scheme members). Our experts can ensure that the business is able to deal with the risks of this so-called ‘section 75 debt’, avoiding triggering where possible, and negotiating with scheme trustees and others as necessary. We believe that prevention is better than remedy. Many businesses are unaware of where the section 75 debt risks lie, especially in terms of likelihood and size of liability. We can work with you to highlight these issues and manage your business accordingly. We can guide strategic decisions which take into account the challenges, deal with risks, engage trustee negotiation where necessary and avoid any emergency arising.
The team at Arc Pensions Law can offer advice and support on either establishing or operating a Master Trust.
We have participated in the establishment of several industry wide trusts, and are highly adept at reviewing platform provider contracts, advising on asset security and offering expertise on a range of other operational issues. Recent increased regulation and the likelihood of further developments has made advice in this area particularly crucial. We understand that controlling adviser fees is vitally important for any defined contribution arrangement, and especially so for a Master Trust. One advantage of being a pensions-only practice is that we can offer a range of fee approaches to suit the needs of our clients. Economical operating costs are particularly vital in a Master Trust environment, and we aim to rise to that challenge and exceed expectations.
A great deal has been written on the issue of the funding of defined benefit pension schemes over the years and the topic continues to provide many sleepless nights for employers.
We can help you to navigate the legal issues relating to, amongst other things:
- undertaking employer covenant review and communicating with the trustees
- integrated risk management
- funding for discretionary benefits
- negotiation of scheme funding arrangements with the trustees
- regulator intervention, and
- putting in place asset-backed contributions, contingent assets and other funding mechanisms.
Arc Pensions Law provides informed, practical assistance to employers and sponsors dealing with scheme funding negotiation, strategic planning to manage funding over the longer term and protecting the employers’ interests in documenting any agreement reached.
We have a firm understanding of the issues that cause pension scheme trustees to seek legal advice and support.
Dedicated, specialist legal support for employers and other scheme sponsors across a range of issues.
Occupational pension scheme support for sponsors, trustees or professional adviser, in the private or public sectors.
Support for clients who are initiating, responding to or grappling with the implications of change.