The Court of Appeal has overturned a High Court ruling which blocked the transfer of a £12bn annuity book from Prudential, now M&G, to Rothesay.
In a judgment delivered via YouTube today (2 December), the Court of Appeal said the prior judgment, delivered last year, was "wrong" on a number of issues and, therefore, the basis for blocking the transfer should be set aside.
Sir Geoffrey Vos, Lord Justice David Richards and Sir Nicholas Patten said the High Court was wrong to find there was a "material disparity" between the financial backing of the two firms and, in any case, had accorded too much weight to this argument.
The Court of Appeal judges also said Justice Snowden had failed to place enough weight on the evidence given by an independent expert, or regulators' lack of objection to the Part VII transfer.
While the transfer will not immediately take place, the issue will now be remitted back to the High Court for final approval.
The first part of the transfer - moving assets and liabilities - had been approved, but the second part, which will be remitted, relates to the transferral of the ownership of 370,000 policies.
Around 1,000 annuitants had told the court they "strenuously opposed" the transfer, noting that they had chosen Prudential for its "age and reputation", and that solvency metrics used had failed to predict future risks.
Rothesay welcomed the decision, noting in a statement: "The Court of Appeal's decision provides important clarity for our whole sector. As a purpose-built company, Rothesay is dedicated to providing our policyholders with the long-term security and excellent service that a specialist provider can offer.
"We are trusted by some of the UK's best-known companies to provide pension solutions and we continue to experience strong growth in the market."
Hymans Robertson partner Michael Abramson said: "It was interesting to see that the Court of Appeal rejected each and every one of the original judge's objections to the transfer from Prudential to Rothesay. This will be very well received by the insurance industry, as the original and unprecedented ruling risked stymieing corporate activity.
"At the same time, the robust process that we have seen in action demonstrates to policyholders, be they pension schemes with buy-ins or individual annuitants, the high level of regulatory and legal oversight in the industry. The rigour and scrutiny of transactions such as this should provide policyholders with a high degree of comfort in the security of their benefits."
The Pension Regulator’s (TPR) strengthened powers under the Pension Schemes Bill could lead to a revival of its clearance process, according to advisers and lawyers.
The long-debated Pension Schemes Bill has received parliamentary approval, guaranteeing its place on the statute book.
Some £20.1bn of defined benefit (DB) pensions were advised to transfer between 2018 and 2020, while £10.2bn were recommended not to transfer, Financial Conduct Authority (FCA) data reveals.
Pension trustees will have much more involvement in business discussions and corporates will need to think more about pensions when the watchdog’s increased powers come into force, LCP says.
Mediation has been under-utilised historically as a means of dispute resolution in this area. Mark Blyth and Geoff Egerton think this is going to change.