As 2022 draws to a close, we have had our first insight into the DWP’s thinking as to which retained EU pension laws will be revoked under the sunset provisions of the Retained EU Law (Revocation and Reform) Bill by the end of next year. On 22 November, the House of Commons Public Bill Committee rejected an opposition amendment to exclude the Court of Justice of the European Union (CJEU) judgments of Bauer and Hampshire from the scope of the sunset provisions in clause 1(1) of the Bill. For further background on the Bill read our colleagues’ excellent Brexit Bonfire article.

The CJEU judgments in Grenville Hampshire v the Board of the Pension Protection Fund and the German case of Pensions-Sicherungs-Verein WaG v Günther Bauer concerned the pension protection to which employees and former employees are entitled on their employer’s insolvency under Article 8 of Directive 2008/94/EC (the EU Insolvency Directive). Further details of the two judgments can be found here but in short, they left the PPF having to undertake a two part check: first, to assess whether members’ compensation had fallen below 50 per cent of the total benefits provided by the scheme and secondly, whether, any reduction in benefits would leave the member having to live below the relevant poverty threshold.

Before the Committee last month, Nusrat Ghani, Minister of State for Business, Energy and Industrial Strategy (BEIS), confirmed that:

"[T]he Department for Work and Pensions does not intend to implement the Bauer judgment through the benefits system, as it is a European Court judgment that does not fully align to the UK private pension protection scheme. … The Hampshire judgment is a clear example of where an EU judgment conflicts with the United Kingdom Government's policies. Removing the effect of the judgment will help to restore the system to the way it was intended to be." (Column 169)

The Government’s decision on Bauer is by no means a surprise – indeed interested stakeholders attended a virtual roundtable on 10 December last year, during which the Government said it was keen to look at introducing primary legislation to remove the Bauer ruling from UK law as soon as parliamentary time allows. Doing so removes a potentially significant administrative burden for the PPF who, otherwise, would have to obtain income information from each member and keep that information updated to continuously monitor whether their income fell below the set poverty line.

However, the PPF has already undertaken significant work to implement the Hampshire judgment. It no longer applies a cap to new retirees and has stated that it hopes to pay arrears of compensation due in the majority of cases by end of this year. If the cap is reintroduced, the PPF may need to recalculate and reduce compensation payments made to affected members on and after 31 December 2023.

In terms of what else could be redacted from UK pensions law, who knows? When introducing the Bill, the Truss government gave little indication as to which retained EU laws it intended to dispense with, keep or change. So far the DWP has catalogued 208 pieces of retained EU law, which can be accessed through an interactive dashboard. However, the dashboard is by no means complete and there are items that are missing. It will continue to be updated on a quarterly basis as further EU derived legislation is identified and to track when legislation is amended, repealed or replaced. However, it currently includes other significant European pension cases such as Allonby, Barber and Walker v Innospec. So far, we do not know the Government’s intention in relation to these but Ms Ghani confirmed to the Committee that each government department will be expected to develop a delivery plan, which will outline their intention for each piece of retained EU law. Those plans will be approved by a minister and "will be shared when ready".

One item we will be watching with particular interest is to see whether the DWP propose making any changes to the IORP II requirement to establish and operate an effective system of governance which sits in section 249A of the Pensions Act 2004. Section 249A and the accompanying Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 which contain the detailed, prescriptive list of those matters that must be in the Code of Practice that TPR must prepare in relation to discharging that requirement, are both listed on the dashboard.

Earlier this year, TPR were reported as saying they were committed to the Single Code (which includes the requirements relating to the effective system of governance) being in force by the end of 2022. However, as the year draws to a close, no date for issuing the final draft of the Single Code has been mentioned, although it is reportedly back with the DWP awaiting ministerial sign-off. Could that be because the Government is thinking of adding the effective system of governance to the Brexit bonfire or is it just that the new Parliamentary Under-Secretary of State at the Department for Work and Pensions, Laura Trott MP, has an awful lot to get through in her in-tray? Hopefully, 2023 will provide an answer one way or another.