Pensions Insight: 17 to 31 July 2023

In this Insight we provide our usual update on all the key pensions legal, regulatory and industry developments including a round-up of caselaw, The Pensions Regulator news and the latest on pensions dashboards. You can access our separate insight on the legislation that will abolish the lifetime allowance here.

Caselaw update

ClientEarth to appeal High Court’s dismissal of its derivative claim against Shell directors

We reported in May that environmental non-profit organisation and charity, ClientEarth, had been granted an oral hearing for reconsideration of the High Court’s dismissal of its application for permission to bring a derivative claim as a shareholder against the directors of Shell PLC for alleged breach of their statutory duties in respect of how they are dealing with climate change risk.

In most cases, the directors of a company will decide whether to bring a claim where a wrong has been committed against the company. However, the Companies Act 2006 includes a mechanism for shareholders to pursue a ‘derivative’ claim in their own name on behalf of the company where it is alleged that there has been a breach of duty by a company director. Derivative claims are only available in exceptional cases – amongst other things the claimants must show that the company suffered a loss and that this reflects the claimant’s own loss.

ClientEarth has confirmed that the judge upheld his dismissal during a 12 July 2023 oral hearing and ClientEarth will now request permission to appeal from the judge, failing which it may head to the Court of Appeal (with permission).

You can read what our Corporate Platform colleagues had to say about the High Court decision here.

Universities Superannuation Scheme – member derivative claims dismissed by Court of Appeal

Another derivative claim also relating to climate change has been dismissed by the Court of Appeal. Two members of the Universities Superannuation Scheme appealed to carry on with multiple derivative claims on behalf of the scheme’s pension trustee company (Universities Superannuation Scheme Ltd) against its directors for breaches of duties under the Companies Act 2006. One of the claims made was that the directors did not have an adequate climate change plan with continued investment in fossil fuels to the financial detriment of the scheme. Other allegations included that the 2020 actuarial valuation had been mismanaged, accrual rate reductions were indirectly discriminatory, and the directors had not properly controlled costs.

The Court of Appeal agreed with the High Court judge that the claimants had not evidenced that the trustee directors had deliberately or dishonestly breached their duties or benefitted themselves at the expense of the trustee company.

Pensions Regulator blog on midlife MOTs

In its blog dated 26 July 2023, The Pensions Regulator asks that pension schemes encourage members to take advantage of the new Midlife MOT service that the Government launched on 5 July 2023 to assist ‘older’ workers with financial planning, health and career skills. The service is provided online and through certain Job Centres in the UK.

As regards financials, MoneyHelper has set up a financial tool that provides personalised reports on how to improve finance matters leading up to retirement – it includes information and help on pensions.

Action: Trustees should liaise with the scheme administrator to discuss how signposting might be built into member communications (specifically targeting those aged 45 to 65).

Pensions (Extension of Automatic Enrolment) (No 2) Bill: second reading in the House of Lords

The Pensions (Extension of Automatic Enrolment) (No. 2) Bill had its second reading in the House of Lords on 14 July 2023. This is the Private Members’ Bill that, if passed, will enable automatic enrolment to be extended to jobholders between age 18 and 21 and which will allow removal of the Lower Earnings Limit from the qualifying earnings band so that contributions can be “calculated from the first pound earned”.

There was discussion during the Lords’ debate on whether the age threshold should be abolished completely, rather than being reduced to age 18. The DWP explained that age 18 was considered appropriate as it corresponded with social security benefit entitlement and children staying in education or employment training until age 18.

The Government expects to consult on the regulations which will contain the detailed changes this autumn.

WPC inquiry into the Norton pension schemes

On 24 July 2023, the Work and Pensions Committee (WPC) launched an inquiry into the ‘lessons that can be learned’ from the collapse of the Norton pension schemes – in March 2022, Mr Stuart Garner, former owner of Norton Motorcycles, received a suspended prison sentence for investing nearly 100% of the assets of three DC schemes in preference shares of his motorcycle company in breach of the employer-related investment statutory provisions (see our Insight). Mr Garner was ordered to pay back £10m plus interest of member funds to the schemes but filed for bankruptcy.

Although a small return of member funds may be made through the bankruptcy of Mr Garner and insolvency of the employer, the most effective way in which the member funds can be recouped will be through the Fraud Compensation Fund (the FCF) – although the FCF believes there are reasonable grounds for a claim the schemes have not yet met the eligibility requirements, which require conclusion of the bankruptcy and insolvency proceedings.

The inquiry will look at The Pensions Regulator’s approach to fraud and dishonesty cases, whether the appropriate regulatory arrangements are in place to improve protection and prevent similar future occurrences, and whether the FCF process needs to be changed, in particular accelerated.

The inquiry closes on 27 October 2023.

TPO restores disabled services following cyber incident

On 19 July 2023, The Pensions Ombudsman confirmed that it has restored those services that were disabled following a recent cyber incident.