Issue Impact
Scheme funding requirements Brexit will allow the review of scheme funding requirements derived from the EU Pensions Directive, although wholesale change to the existing scheme specific, prudence based approach is unlikely. However, Brexit will remove the potential for anticipated longer term changes to move to a far more onerous funding basis (the so-called ‘holistic balance sheet’).
Pensions aspects of TUPE Under Court of Justice case law, pension rights on redundancy or early retirement can transfer, whilst other pension rights do not. This currently complicates business sales and the Government would be free to streamline its approach e.g. to restore a broad exemption from TUPE for pension rights.
Pensions aspects of equality legislation Discrimination legislation will remain, but it will be possible to expand existing exemptions in key areas such as age discrimination, which has never sat easily with the concept of a pension scheme. There will be scope to review the law on sex discrimination as it relates to issues such as scheme calculation factors or guaranteed minimum pensions, both areas in which application of EU law has led to difficulties in practice, although the Government’s ongoing review of the latter has not yet suggested it will make such changes after Brexit.
Investment Regulations contain restrictions on pension scheme investment derived from the EU Pensions Directive. These could be amended but seem unlikely to be the subject of fundamental change. In addition, the European Markets Infrastructure Regulation which has implications for trustees purchasing derivatives could, in principle, be amended.
Data protection The Government has confirmed that the new European Data Protection Regulation will apply in the UK from when it comes into force in May 2018. This means that Brexit will not, in practice, prevent trustees from having to revisit their existing approach to data protection issues.
Cross-border schemes The EU Pensions Directive contains strict funding requirements for schemes which operate across European borders. UK legislation implementing these requirements will need to be amended but the Government’s proposed approach is not yet known.
Scheme governance The second EU Pensions Directive, which EU member states must implement by January 2019, contains additional obligations in relation to scheme governance and disclosure, including “fit and proper” requirements for trustees and member rights to annual benefit statements. Until the Government confirms its proposed approach to implementation, we do not know the extent to which these will be taken forward in UK law.

 

Pensions contacts