Pensions

Pension lawyers suffer from a slightly geeky reputation. In reality, the culture is businesslike and client-focused but a leather-bound tome is never far away…

What types of law are involved in pensions work?

Most – on my desk I currently have pension statutes as well as practitioners’ texts on trust law, the law of insurance contracts, tax law and corporate law. I have also had to look at financial services regulations and even the law on in vitro fertilisation. For the curious: when might an unborn baby be entitled to a child’s pension. Answers on a postcard please.

What is the makeup of a pension lawyer’s client base?

Broadly, there are three types:

Corporates: Corporate employers are likely to run a pension scheme for their employees and as such require ongoing advice. We often act for purchasing companies in a corporate takeover, often a private equity vehicle, where the target operates a pension scheme. Of late, corporates have needed an increasing amount of advice in connection with their auto-enrolment obligations as well as in relation to their existing arrangements.

Trustees: Trustees of pension scheme trusts are under duties that derive from both common law and pension specific legislation. Guiding trustees through the haze is an important part of pensions work. At Macfarlanes there is often a corporate flavour, for instance advising trustees on their rights in relation to corporate restructurings that may affect the ability of the employer to support the pension scheme.

Individuals: The Government’s focus on the tax regime has meant that increasing numbers of individuals are requiring professional advice.

What are the major recent changes in the pensions world?

A new auto-enrolment law has meant that for the first time workers will be automatically enrolled into their company’s pension scheme unless they actively choose to opt out. The regime is currently being rolled out with the largest employers going first and all employers needing to comply by April 2017.

More generally, we have seen a change in pension provision from defined benefit schemes, where the member’s benefits are guaranteed, normally by reference to final salary, to defined contribution schemes, where a pot is built up consisting of contributions from employer and employee and the amount of benefit depends on the size of the pot. News stories about older people working for longer are likely to continue as a result of these changes as the volatility of the markets affects the investment performance of retirement pots, as well as the annuity rates offered by insurance providers. Employers are increasingly concerned with ensuring that employees can make well informed choices in relation to their retirement provision.

What impact has the recession had on this practice area?

The common thread running through most of the key work listed above is that economic circumstances have forced all parties to look carefully at pension provision. We have seen employers concerned about affordability and the drain on their resources of large defined benefit schemes, reflected in the scheme closures, and we have seen individuals give increasing scrutiny to the statements they receive, resulting in increased litigation.

The strain on household budgets has caused many to try and access their pension savings early, which results in a large tax charge and may not be permitted under the relevant scheme’s rules. This has made pension liberation a fruitful area for fraudsters who promise access to savings if they are transferred to their ‘scheme’. Inevitably, the savings are never seen again.

Which other practice areas do you work closely with?

Traditionally we have worked closely with the corporate and employment teams. However, the broad range of work covered by Macfarlanes means that there are increasing connections across the firm. Recently, we have worked closely with the litigation department in relation to disputes, the funds department in relation to investments and the financial services department in relation to the ever-changing regulatory regime.

What skills do you need to make a good pensions lawyer?

Communication is crucial both with your client and with other parties, all of whom will have different duties and objectives. A fair amount of patience and attention to detail is required both when researching and drafting. Being curious about the law helps given that there is a lot of it involved in pension work.

What phrase is a pensions lawyer most likely to use and what does it mean?

“It’s a little bit complicated, but…” means that to find the answer you will need to look at primary legislation, corresponding secondary legislation, practitioners’ texts, the HMRC manual, recent case-law and relevant commentary on it and of course the Rules of the relevant pension scheme which were inevitably written in 1950 and are over 100 pages long.

What was that about being slightly geeky?

Jamie Robson is a trainee solicitor in the pensions department at MacFarlanes.