However, in his 164-page judgement, (published 19 May), Justice Morgan said the APS trustees had not made a "benevolent or compassionate payment", had not committed an abuse of power, and had regard "to all relevant considerations and to no irrelevant considerations". The judge ruled on both the trustees' decision to amend the scheme rules - using clause 18 which allowed rules to be amended "in any way" unilaterally - to grant themselves a unilateral power to award discretionary increases in 2011, and the eventual decision to give out a 0.2% increase in 2013. The judge agreed the deficit and BA's positions were factors that needed to be taken into account during a decision- making process, but said trustees had adequately considered these. He disagreed with BA that both actions had been conducted improperly or were not allowed, thereby allowing the 0.2% increase to go ahead.
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Low earners suffer wage suppression as companies plug pensions deficits 31 May 2017
Employer contributions to defined benefit (DB) pension schemes deficit payments are leading to a reduction in hourly wages, a study has found.
According to a report by Pinsent Masons a study has identified a sharp increase since 2000 in the share of 'non-wage' elements in employee compensation, including payments into pension schemes. Last year non-wage elements accounted for just under 17% of average pay, up from 13% in 2000. The biggest driver of this increase, accounting for £26bn of the overall £37bn increase in 2016, was employer pension contributions. The report said increased deficit funding contributions accounted for around £19bn of this rise in non- wage employer contributions. Resolution said every increase in deficit payments equivalent to 10% of a company's total wage bill fed through into an average reduction in hourly pay for its employees of roughly 1%. In turn, this meant that around 10% of the £19bn rise could be directly associated with lower hourly pay. The average annual impact on workers in companies with DB scheme deficits was between £145 and £225. Although there was a stronger negative effect on employees who remained active members of a DB scheme, there was also a significant impact on lowest-paid workers.
Resolution said the “current scale of deficits and the tendency of longevity to surprise on the upside” meant that there was likely to be a continued impact on pay for the foreseeable future.
There are around 6,000 DB schemes in the UK but 85% are closed to new members and 35% are closed to future accruals. About 40% of DB members are already retired.
DB schemes promise a set level of pension once an employee reaches retirement age, no matter what happens to the stock market or the value of the pension investment, in contrast to defined contribution schemes where payouts are determined by the amount of contributions paid in and their investment performance.
Further details can be found on Pinsent Mason’s website.
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Pension schemes newsletter 87 - May 17 2 June 2017
HMRC’s latest pension schemes newsletter includes a reminder for those operating relief at source to submit their annual return of individual information by 5 July 2017.
The newsletter is published by HMRC’s Pension Schemes Services to update stakeholders on the latest news for pension schemes. The following topics are covered in the Pension schemes newsletter 87 :
The Chartered Institute of Payroll Professionals
Policy News Journal
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