Last week the motion passed agreeing agreed to firmly limit the scope for the UK Government to allow itself powers to shift legislation through ‘Henry VIII’ powers, and lock-in the utmost Parliamentary oversight of powers given to ministers. This is set to affect people, businesses and sectors all across the nation.
Here Lawyer Monthly benefits from specialist insight from Anna Rogers, Senior Partner at ARC Pensions Law, on the potential impact of the bill for pensions and human rights.
Brexit. This single word immediately serves to polarise opinion. To some, it represents economic liberty and the restoration of national sovereignty. To others it means undermining peace, prosperity and legal protection. The reality is likely to be complex as contrasting, and perhaps unforeseen, consequences emerge for different sectors of the economy and in different parts of the country.
The British constitution is on the verge of a transformation of historic and unprecedented proportions, but if we focus on the world of pension schemes, what can we foresee?
Pensions law has been heavily influenced by European law for more than 40 years. That influence has been exerted by the direct effect of assorted Treaty Articles (primarily equal pay), decisions of the European Court (such as Barber, Coloroll etc) and the impact of relevant EU Directives which have been translated into English law.
As far as the future is concerned, beyond the terms of any deal yet to be negotiated, the only certain piece of legislation we are promised is a Great Repeal Bill. The very title provokes the question: so what are we going to lose?
Arguably, the Great Repeal Bill, which will become an Act in 2019 or 2020, will do quite the opposite of repealing: although the Bill will remove the 1972 European Communities Act (ECA), which gives EU law authority, first it will adopt EU law lock stock and barrel into UK law. The plan is that parliament will then have the power to dispense with those parts of EU legislation it no longer wants. It will be able to amend existing laws using secondary legislation, while major restructuring or new laws will be put forward in separate bills.
The vast majority of pension-related legislation that originated from the EU has already been written into UK law. Two questions arise; first, might the Great Repeal Bill unwittingly go further than UK law currently does in complying with EU law, and secondly will there really be no constraints on the rights that parliament will be able to take away?
Writing the entire acquis communautaire or body of EU laws into UK statute will mean nothing “falls away” on Brexit. That could have consequences in connection with the few remaining issues of sex discrimination in pensions, relating to GMPs and gender based annuity rates. It also leaves some things unclear, such as what it means to adopt a Directive in UK law. At the moment, the UK decides how to implement a Directive and until it is implemented it has limited effect. The IORP II Directive governing pension schemes is due to be implemented before the UK can leave the EU. Will it be implemented? Including the governance requirements and fit and proper person rules for trustees? Or will there simply be a UK law requirement to implement it, that is then quickly abolished?
We do know that the UK Government will be able to remove some requirements that were originally driven by European law or amend them to moderate their impact, subject to approval by Parliament. However, the Government’s desire to do so is unknown and, critically, pension benefits have been earned and so making changes could raise questions as to whether any application of new law would or could be retrospective.
Clearly equal pay earned in the past cannot be recouped. When it comes to taking away earned rights, the post-Brexit world will depend on the boundaries of protection offered by UK law. The extent to which the Government will seek to pursue whatever opportunities exist will depend on political considerations; the removal or reduction of individuals’ rights is unlikely to be attractive.
The UK is a signatory to the European Convention on Human Rights, although withdrawal is occasionally mooted. The ECHR is not part of the EU and will not change on Brexit. We also have the Human Rights Act 1998. Judges can and do declare legislation to be incompatible with human rights, though that is not the same as overruling it. In the public sector, we have seen from the Supreme Court’s recent ruling in the Brewster case that pensions can be protected as property rights. The Human Rights Act may be replaced by a British Bill of Rights. That would theoretically give an opportunity to extend the carve-outs on property law, though expropriation tends to be tightly controlled. English common law may protect property rights too, though this is untested.
So Brexit may well have a significant impact on pension schemes insofar as it affects the economy, investments, and sponsor covenant. However, there are few areas of UK pensions law where immediate and significant post-Brexit reform is likely. The legal constraints on accrued benefit changes within UK law remain to be fully explored; whether there is a real desire to explore them will ultimately depend on the prevailing political climate.