28 February 2019

Summary of Counsel’s Advice on the Pensions Consultation Regulations

Many schools will be aware that the NASUWT have disseminated a briefing note to members regarding schools potentially withdrawing from the TPS.

Within this note, the NASUWT maintains that if a school intends to change its pension provision, it must comply with a statutory consultation process which must last at least sixty days. They also state that schools must consult over the detail of the proposed new pension scheme.

The sixty day consultation period referred to by the NASUWT derives from specific pension consultation regulations (Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006) (“the Regulations”). The Regulations apply in certain circumstances when an employer makes changes to a pension scheme. Their impact is that the consultation period would extend to sixty days, and consultation must cover specific points, including the impact of the change on members.

We have been advised that the Regulations do not apply to public service (sometimes referred to as public sector) pension schemes, and that the TPS is a public service pension scheme. The guidance the ISBA has issued to date therefore relates only to general principles under employment law and the specific statutory consultation provisions required by TULRCA which are triggered due to the numbers of staff affected. This will result in a 30 or 45 day minimum consultation period, although longer may well be needed to ensure meaningful consultation. As part of this consultation we would recommend that staff are fully informed of the details of the proposed alternative pension scheme.

Given the position of the NASUWT and the potential impact of the Regulations, we have obtained Counsel’s Opinion on the application of the Regulations. Counsel has confirmed the view of the legal advice we had previously obtained, namely that the Regulations do not apply. Counsel takes the view that the TPS is a public service scheme, and the Regulations do not apply to public service pension schemes.

While the advice we have received gives us a good deal of certainty in our view of the application of the Regulations, we anticipate that the NASUWT may continue to disagree with this stance and may encourage members to challenge this.

We have therefore also sought advice on what the NASUWT or its members could do by way of challenge, and what the potential recourse could be if it was found that the Regulations did apply and schools failed to comply.

Members (or the NASUWT itself in respect of schools for which it is a recognised union) can make a complaint to the Pensions Regulator if they consider that a school is in breach of the Regulations. The Pensions Regulator will consider the matter, with input requested from the School although this process is likely to take many weeks.

If the Pensions Regulator found that the Regulations did apply (in Counsel’s view unlikely) and a school was in breach, the potential remedies are:

1. The Pensions Regulator may issue a school with an improvement notice, ie directing them to comply with the Regulations
2. The Pensions Regulator may issue a school with a financial penalty

Option 1 is likely to be unworkable as schools may/will have already finished consultation before the Regulator makes a decision and the Regulator is unable to ask a school to ‘redo’ the consultation.

While the financial penalty can be significant (up to £50,000), the Regulations state that the Pensions Regulator may issue a fine where they consider that an organisation “fails without reasonable excuse, to comply with a requirement to consult.” We understand that the Regulator takes a sensible and pragmatic approach and if they did find that the Regulations apply, it is likely they would take account of the fact that schools will have consulted by virtue of TULRCA. Counsel also highlighted the importance of the “without reasonable excuse” requirement. We are informed that reliance on legal advice that the Regulations do not apply is likely to provide a “reasonable excuse” or at least significantly reduce any penalty.

Helpfully, there is no provision that failure to comply with the requirements of the Regulations prevents a change from taking effect. This means that even if a challenge is launched and were successful, it would not impact on the actual withdrawal from the scheme.

We are in the process (through legal advisors) of contacting the NASUWT to share our advice and discuss their approach. We will update members in due course.

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About the Author
Kristine Scott, Partner, Head of Education Sector
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