Pensions Weekly Update – 7 September 2022

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Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes, which you might have missed, with links for further information.

The High Court has handed down its judgment in the application for judicial review brought by five large pension schemes relating to (1) the decision by the UK Statistics Authority (UKSA) to change the method used to compile the retail prices index (RPI) so that it aligns with the consumer prices index including owner occupiers' housing costs; (2) the decision of the chancellor that the government would not pay compensation to the holders of UK index-linked gilts; and (3) the decision of the chancellor to withhold his consent to the change being made before 2030. The pension schemes also brought a private law claim in the event that the court ruled the UKSA's decision to be lawful.

In relation to the application for judicial review, the pension schemes argued (1) the change in methodology was outside of the UKSA's powers; (2) there was a failure to take account of the impact on legacy users of RPI by the UKSA and the chancellor; and (3) there was a failure to consult by the UKSA and the chancellor. The claim for judicial review was unsuccessful on all counts. It is perhaps worth noting that the court decided that the UKSA is essentially concerned with its statistical quality and its fitness to be used as a measure of consumer price inflation, and that decisions on whether to use an index such as the RPI in a commercial or social context are for others to make.

In relation to the private law claim, the pension schemes argued that implementing the RPI decision from 2030 would effectively mean that RPI would cease to be published and the chancellor would be obliged to select a replacement index. If this were the case, it would have a knock-on effect on gilts issued from September 2005 onwards, which contain a "cessation clause" in the event that RPI ceases to exist. The court considered this private law claim and ruled that RPI would not cease to exist – it would merely be compiled differently – and that "cessation clauses" in gilts issued from September 2005 onwards would not be triggered.
The Department for Levelling Up, Housing and Communities has published a consultation on proposals to require the Local Government Pension Scheme (LGPS) to undertake mandatory governance, reporting and disclosure in relation to climate-related risks and opportunities in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). It is also proposed that administering authorities would calculate the carbon footprint of their assets and assess how the value of each fund's assets or liabilities would be affected by different temperature rise scenarios, including the aim of aligning with the Paris Agreement goals. It is proposed that the first reporting year would be the financial year 2023-24. The proposals follow on from the largest pension schemes in the private sector, along with authorised master trusts and collective defined contribution schemes, being required to undertake TCFD reporting and disclosure since 1 October 2021, and being required to report on alignment with the Paris Agreement goals from 1 October 2022. Consultation closes on 24 November 2022.
HMRC has published newsletter 142. Of particular note are an update to the tax manual guidance in relation to normal minimum pension age, and further information on the requirement to migrate all existing pension schemes from the old Pension Schemes Online Service to the new Managing Pension Schemes Service. By way of reminder, trustees are responsible for ensuring that this happens. It is unlikely that scheme administrators will be able to do this on your behalf. Please see our weekly update of 8 June 2022 for further information.
Our annual Pensions Lessons for Trustees 2022 is now available to help you navigate through some of the key issues to consider at autumn trustee meetings. We hope you find it useful.