Pensions: what's new this week? - 8 July 2024

Welcome to your weekly update from the A&O Shearman Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.

Fixed penalty notice revoked: TPR communications not received

The presumption of service in section 7 of the Interpretation Act states that service is deemed to be effected ‘by properly addressing, pre-paying and posting’ a document, but does not specify what the ‘proper address’ should be. In the latest decision by the First-Tier Tribunal (FTT) involving non-receipt of auto-enrolment correspondence from the Pensions Regulator (TPR), doubt has been cast on the wisdom of relying solely on an employer’s registered office address to ensure receipt by the employer: Been London Design Ltd v The Pensions Regulator.

In this case, the employer had failed to submit its re-declaration of compliance with its auto-enrolment duties and was issued with a fixed penalty notice. The registered office of the employer had changed and a compliance reminder and two notices sent by TPR to the employer’s registered office address were returned marked ‘gone away’. The registered office address was subsequently updated on Companies House and a penalty notice was received at the new address. The re-declaration of compliance was completed and the employer requested a review of the penalty as it had not received earlier notices. TPR confirmed the penalty and the employer appealed.

The FTT was critical of TPR’s approach, saying that it ‘relies entirely on the fiction that notices sent to a company’s registered office are received by the directors. However they have reified this rebuttable presumption’ rather than using other channels of communication such as email to encourage compliance. The FTT also found that TPR had, on review, sought to protect the penalty rather than responding to the fact that compliance notices had not been received. The FTT revoked the penalty.

The Companies Act requires that a company’s registered office is at all times at ‘an appropriate address’, meaning one at which a document would be expected to come to the attention of a person acting on behalf of the company. However, the Employers’ Duties (Registration and Compliance) Regulations 2010 contemplate that notices will be sent ‘to a person’s last known or notified address’ (not necessarily the registered office). Each case in which nonreceipt is an issue will turn on its own facts – there have been previous instances of notices being overturned due to non-receipt despite being sent to the last-known address as recorded on the Regulator’s systems.

Read the decision

Fixed protection: Loss of protection confirmed due to benefit accrual

The FTT has upheld HMRC’s decision to revoke an individual’s 2012 fixed protection certificate after he breached the statutory limit on benefit accrual: Laker v HMRC. Fixed protection is lost if certain conditions are not met – those conditions include that the holder of FP2012 must not have benefit accrual above a certain threshold after 6 April 2012 so, in practice, active membership generally ceases. Dr Laker had received his FP2012 certificate on 30 January 2012. He left pensionable employment with effect from 1 February 2013 but rejoined with effect from 1 March 2013 for six months. It appears that re-enrolment into active membership was automatic when Dr Laker took up new employment from 1 March 2013, and that he failed to opt out. His pensionable pay was static between 1 February 2012 and 31 January 2013 but he received a pensionable pay rise from 1 April 2013 and it was calculated that benefits above the threshold accrued from 20 July 2013. Dr Laker sought to have his pensionable service for July and August revoked but this request was refused.

The scheme regulations define ‘final year’s pensionable pay’ as ‘pensionable pay in respect of the member’s last year of pensionable employment’ and provide for pensionable service to be calculated by aggregating any period of pensionable employment. The ‘last year of pensionable employment’ is that which ends ‘on the date the member ceases to be in such employment’. Dr Laker argued that ‘year’ in this context meant 12 consecutive months, so his last year of pensionable employment ended on 31 January 2013 and the increase in his pension did not breach the threshold. However, on the basis of aggregating periods of service, HMRC argued that the 1 April 2013 increase to his pensionable pay had to be taken into account. Interpreting the word ‘year’ in the context of the legislation and scheme rules, the FTT agreed with HMRC that in this case, the last year of pensionable employment meant a combination of periods totalling 12 months. Despite the abolition of the lifetime allowance charge, the loss of FP2012 for this member will affect the amount of his lump sum allowance and lump sum and death benefit allowance.

Read the decision

Final reminder: Sustainability and pension fund investing - priorities and politics in the U.S., EU and UK - Wednesday 10 July at 2pm BTS

Politicians and lawmakers have long recognised the role of pension funds in the transition to greener finance and a sustainable economy. New governance and reporting requirements continue to come on-stream in the EU and the UK, widening the scope of sustainability issues to be considered and improving transparency by way of governance and reporting requirements. But political and economic headwinds are increasing, ranging from the UK government’s focus on using pension capital to boost the UK economy, to pushback against perceived ‘woke’ agendas in the U.S.

Join us on Wednesday 10 July 2024 at 2pm BST, when our panel of speakers will bring together the latest insights and expectations for political and legal change in the U.S., EU and UK.

Click here to register for the webinar 

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