Sarah Philpott, trainee, Baker & McKenzie
4 December 2009
25 November 2013
25 November 2013
4 March 2014
10 March 2014
26 March 2014
Pensions lawyers advise employers, trustees and scheme administrators in relation to issues arising out of the setting up and running of (mainly occupational) pension schemes, including advising on related litigation.
What’s it all about?
Pensions lawyers advise employers, trustees and scheme administrators in relation to issues arising out of the setting up and running of (mainly occupational) pension schemes, including advising on related litigation. They also provide support to transactional departments on the pensions aspects of deals. Much of the work tends to be very legally technical, often involving consideration of large amounts of primary and secondary legislation and complex trusts law issues.
Trainees in the department might get involved in the following areas:
· Researching regulatory issues and advising clients on their pension scheme liabilities.
· Drafting announcements to be sent to pension scheme members.
· Assisting with due diligence on the pensions aspects of M&A and corporate finance transactions.
· Completing necessary filings with pensions regulatory bodies.
· Assisting with the merging and winding-up of occupational pension schemes.
· Drafting various pension scheme documents including Deeds of Amendment, Participation, Appointment and Termination.
· Attending and helping to organise business development functions, including client and auditor events.
What’s the working culture like in a pensions team?
At Baker & McKenzie the pensions department is relatively small compared to other departments, resulting in a close-knit friendly family atmosphere. Within a couple of weeks in the department I had worked with the vast majority of pensions lawyers and had exposure to a wide variety of different types of work. As a pensions lawyer you can work for a wide range of clients, on a variety of topics and get involved in different types of work (e.g. research, drafting and attending meetings).
The work can often be extremely technical and require heavy concentration, but the associates and trainees reward themselves with revitalising tea breaks and sugary treats to get them through.
As the majority of the work in the pensions department is advisory (rather than transactional) it is far easier to manage your time and impose your own deadlines (rather than tight timetables imposed by corporate clients) and, as such, pension lawyers work relatively nice hours. You will rarely hear of a pensions lawyer working an all-nighter.
What’s the typical makeup of a pensions lawyer’s client base?
The pensions department advises both employers and trustees on the legal aspects of pensions arrangements. The pension schemes range from very large schemes to small self-administered plans and many have an international aspect. Baker & McKenzie advises multi-national corporations (such as Sony and BP) on the pensions aspects of sales and purchased worldwide, involving pensions advice in more than a dozen jurisdictions in each case.
What other practice areas do you work closely with?
The pensions department has its own client base and will often provide legal advice independently of any other department. However, on occasion, the department will work closely with the employment and corporate departments.
On corporate transactions, a pensions lawyer would provide advice on the pensions aspects of the deal. Quite often the pensions considerations can affect the structure of a deal (e.g. whether the deal proceeds as a share sale or asset sale) and sometimes even bring a deal to a halt. This is because the majority of pension schemes are in deficit and so the purchaser is often extremely interested in how much liability it would take on if it bought the company with the pension fund. Much negotiation on a deal revolves around limiting this liability for the purchaser.
Where a company wishes to consolidate several companies in to one, both employment and pensions aspects must be considered. Some employee rights automatically transfer to the new company, others do not. The pension and employment departments will work closely to provide the best overall solution to the client.
What skills do you need to be a good pensions lawyer?
It is useful to have a love of black-letter law as often research tasks will involve searching through primary and secondary legislation to find the relevant provisions. On occasion, it may be necessary to go back to see what the law was at the time a pension scheme was set up so it is important to have a good understanding of how legislation works in general.
After understanding what the law is, it is important to consider the practical application of the law to a client’s situation and consider how the law may be used to a client’s advantage. Pensions law is complex, giving rise to a wide range of constantly evolving legal rights and responsibilities for employers and trustees. A pensions lawyer is required to assist clients in unravelling the complexities of every aspect of pensions law with clear analysis and practical solutions. Accordingly, an interest in problem solving is vital.
Now, once the pensions lawyer understands the implication of the law and has applied it to the client’s advantage, it needs to be communicated to the client. Strong communication skills are crucial, both oral and written. It is important to tailor advice to the client’s knowledge and understanding of pensions law. Often you will need to explain complex areas of law in a clear and concise manner.
What impact has the recession had on your practice area?
As mentioned above, the department has its own client base and does not rely on the flow of corporate deals. Therefore, the department has remained steadily busy during the recession.
Since the Maxwell scandal in the early 1990’s, which affected 30,000 people to the amount of £400m, pension schemes have become increasingly more regulated. As legislation, the economy and business needs change so does the work of a pensions lawyer. I’m sure you will find many a pensions partner that will tell you how much the law and type of work they do have changed over the years.
Similarly, the recession has had an impact of the type of work the pensions department has seen. Over the last couple of years our pensions group has responded to our clients’ needs. Many of our clients have been interested in streamlining their pension schemes and so the department has developed an understanding of the options available to restructure pension schemes. Similarly, more recently the Government, like many businesses during this financial crisis, has turned to outsourcing as a way of reducing its costs. Our pensions group has focused more closely on our outsourcing work.
What prominent Pensions cases has your firm been involved in?
Baker & McKenzie has advised the Pensions Committee in the important South West Trains case in connection with the effect of pay restructuring on the Railways Pension Scheme. We advise the Merchant Navy Officers Pensions Fund (MNOPF) on an ongoing basis but have represented the MNOPF in an application to the High Court regarding the obligations of various categories of employers participating in the fund to make good deficits which may arise from time to time.
What do you think is the future shape of pensions law?
The area of pensions law is constantly changing. More recently, trustees (especially trustees of final salary schemes) have been given important powers, and consequently, have even more responsibility. Trustees are becoming increasingly more involved in the corporate activity of employers, especially where there is a funding deficit.
With the increase in responsibility, there is an increasing emphasis on training for trustees. Trustees must be familiar with the scheme documentation and trustees are required to have knowledge and understanding of pensions and trust law and scheme funding and investments. I imagine trustees will increasingly approach law firms to provide advice on particular issues that arise, primarily to limit their own liability.
A major challenge for pension scheme trustees and employers is addressing the scheme deficits. Both employees and trustees have had to consider new ways of managing risk and dealing with the deficits, including liability driven investment strategies and alternative asset classes. I think that in the future trustees and employers, with the assistance of lawyers and pensions actuaries, will become more inventive with their solutions to managing the deficit.
What phrase is a pensions lawyer most likely to use and what does it mean?
It’s not so much a phrase as a different language! Pensions lawyers are huge fans of acronyms, and it can take a little time to get your head around them. You will often hear pensions lawyers refer to “DB schemes”, “DC schemes”, “the PPF”, “SERPS”, “SIPs” and “SFPs”. It all sounds very intriguing to the untrained ear but as soon as you learn the lingo you can decode conversations. I’ll give you a head start:
Occupational pension schemes may be either defined benefits schemes (DB Schemes) or defined contribution schemes (DC Schemes). DB schemes (often known as final salary schemes), are schemes which specify the level of benefits which will be payable on retirement, death or leaving the relevant company’s employment. Normally, the resulting pension will be calculated by reference to the employee’s final salary and years of service. DC schemes (often known as money purchase schemes) are schemes under which the eventual pension benefits are not specified but the employer and the employee each agree to contribute to a fund at a specified rate (say 5% of salary for each). The resulting fund is normally used to purchase an annuity from an insurance company at retirement.
The PPF, otherwise known as the Pensions Protection Fund, is a Statutory Fund in the UK that was set up in response to public concern that when employers sponsoring a DB pension scheme because insolvent, scheme members could lose some or all of their pension if the scheme was underfunded. The PPF offers compensation to those pension scheme members affected by insolvencies.