ML Covered - April 2025

We are pleased to share our latest instalment of ML Covered, our monthly round-up of key events relevant to those dealing with Management Liability Policies covering D&O, EPL and PTL-type risks.

Regulators drop proposed new DEI rules

On 12 March 2025, the Financial Conduct Authority (the FCA) and Prudential Regulation Authority (the PRA) announced that they were dropping proposed new rules to boost diversity and inclusion in the industry. This decision was made in light of industry feedback and changes to the law that are already pending. The CEO of the PRA, Sam Woods, stated that the PRA still believes that an appropriate focus on diversity, equity and inclusion (DEI) initiatives could benefit governance, decision making and risk management in firms. However, he believed that the proposed rules could be seen as in tension with the current efforts to shift regulation towards a focus on boosting economic growth.

These moves by the FCA and PRA follow a large scale revocation of DEI initiatives in the United States in the opening weeks of Donald Trump's second presidential term. Various US financial services firms have also softened their internal policies on DEI.

Despite these high-profile rollbacks of DEI initiatives, a survey conducted by Airmic (a UK risk management association for risk and insurance professions) shows that the majority of organisations do not intend to follow suit. The survey found that 77% of respondents provided that their organisations are keeping their DEI policies and initiatives as they currently stand. Another 9% of respondents replied that they have updated or were updating their existing DEI policies. This suggests the rollback is not as widespread as the high-profile examples would suggest. Rather, it suggests that firms are still keen to adopt DEI initiatives with the aim of fostering a culture of understanding, respect and collaboration, and improving equity in the workplace.

As such, Insurers and their Insureds will need to continue to be mindful of what their DEI obligations are, given the current changeable regulatory landscape. 

To read the FCA's and PRA's update, please click here.

Court upholds investors' claim that they relied on directors' misrepresentations when investing in a company

In Mather and others v Basran and others [2025], the High Court ruled in favour of the Claimants' case that they had relied on the Defendant's misrepresentations when investing in a company.

Background

Between 2012 and 2014, the four Claimants made a series of investments in Yagna Limited (the Company), a biotechnology company. The First Defendant was the Company's sole director and majority shareholder.

The Claimants argued that these investments were made in reliance on representations by the First Defendant that a well-known local businessman (the Second Defendant) had been, or was soon to be, appointed as director of the Company. The Claimants argued that the First Defendant had confirmed this in an email dated 5 December 2012, however the Second Defendant was not appointed as a director of the Company until 12 September 2015 (and so three years later). In 2016, the Company was placed into creditors' voluntary liquidation.

The Claimants subsequently brought a claim for either:

• fraudulent and/or negligent misrepresentation by the Defendants which induced them to invest substantial sums into the Company; or
• misappropriation of the sums invested in the Company by the Defendants.

The First Defendant argued that he had not sent the email and that the Second Defendant must have accessed his personal computer to send it. The First Defendant argued that the fact that the Second Defendant was formally appointed as a director on 12 September 2015 was immaterial as the Second Defendant was a shadow director.

Decision

The Judge found that two of the Claimants had relied on the First Defendant's false representations when they made their investments, and that the First Defendant had intended for them to rely on it. The Judge rejected the arguments that the Second Defendant had been acting as a shadow director and that the onus was on the First Defendant to inform the Claimants that he was of this view. There was no duty on any of the Claimants to check the true position. The Judge also rejected the First Defendant's argument that the email of 5 December 2012 had been sent by the Second Director. The First Defendant was ordered to pay the sum of £1 million to these two Claimants plus interest of 2.5% per annum from the date of their investments.

However, the Judge noted that the other two Claimants invested their sums before the email had been sent and therefore could not have relied on its contents when making their investments. The Judge dismissed their claims.

Key Takeaways

The judgment illustrates the importance for directors to make accurate representations to potential investors. Given the increasing number of corporate insolvencies, investors may seek to bring claims against directors alleging that they were not correctly informed when making their investments. The judgment also makes clear that the onus will be on the executive board of directors to correct a claimant's misunderstanding if the claimant wrongly assumes that another individual is a member of the board of directors if in fact, that individual is merely a de facto director.

To read the full Judgment, please click here.

The Employment Rights Bill – Proposed Amendments

In this month's edition of ML Covered, we bring to your attention the host of further proposed amendments to the Employment Rights Bill that the Government tabled on 14 March, following consultations with businesses, trade unions and the public. The key changes to the Bill, now on its second reading in the Lords, are discussed below:

Statutory sick pay

The previous draft of the Bill: The Bill removes the requirement that Statutory Sick Pay (SSP) is only payable from day four of sickness, as well as the condition that employees must earn above the Lower Earnings Limit (currently £123 per week) to qualify. All employees will therefore be eligible for SSP, a direct cost to employers.

New proposed amendments:

• If an employer fails to pay a worker an amount owed (such as the minimum wage or SSP), the Secretary of State may issue a notice of underpayment, requiring the employer to pay the outstanding amount.
• The Secretary of State will be required to consult on how the Government can best assist small employers with the costs associated with SSP
• The weekly rate of SSP in Great Britain will be set at the lower of £118.75 (reflecting the recent changes to the National Living Wage) or 80% of an employee's weekly earnings, based on the findings from a consultation held last month with various stakeholders.

Fair Work Agency

The previous draft of the Bill: The Bill grants the Secretary of State a range of functions to enforce specific employment laws, which, in practice, will be executed by the Fair Work Agency (FWA). The FWA consolidates existing state enforcement functions, including those related to holiday pay and Statutory Sick Pay. Additionally, the Bill empowers the Secretary of State to make regulations that expand the scope of state enforcement functions to cover further areas of employment law. It also proposes the abolition of the Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement, with these responsibilities transferring to the FWA. A unified set of powers will be granted to the FWA, enabling it to investigate and take action against businesses that fail to comply with the law.

New proposed amendments:

• The FWA will be empowered to bring Employment Tribunal claims on behalf of workers who are not pursuing claims themselves.
• A new clause will allow the Secretary of State to provide, or arrange for the provision of, assistance to individuals involved or potentially involved in civil proceedings related to employment or trade union law, or the law of labour relations. This assistance may include legal advice or representation.
• The Bill also introduces a provision that allows for notices of underpayment to apply to payments due before the Employment Rights Bill came into effect. The "claim period" for a notice of underpayment will be the six-year period ending on the day the notice is issued.

Flexible working

The previous draft of the Bill: The Bill requires an employer who refuses an employee’s application for flexible working to explain why the employer considers it reasonable to refuse the application.

New proposed amendments:

• A new amendment would restrict an employer's disclosure of its reasons for refusing a flexible working request where the disclosure would raise national security issues (an amendment that will be unlikely to be relevant to most employers).
• A further clause would require the Government to report on employers’ compliance with the flexible working duties set out in the Bill.

Trade Unions

The previous draft of the Bill:

• Trade unions that possess a "certificate of independence" have the right to access the workplace to meet, represent, recruit or organise workers (whether or not those workers are members of a trade union).
• A trade union is required to provide information to an employer ahead of an industrial action ballot as to the number of employees concerned in each category or workplace and how the total number of employees concerned was determined by the union.
• Trade unions are required to give employers seven days' notice of industrial action.

New proposed amendments:

• The right for a trade union to access a workplace and recruit workers has been extended to a digital right of access (e.g via email or intranet).
• An amendment would remove the requirement to provide information to the employer ahead of an industrial action ballot as to the number of employees concerned in each category or workplace.
• Finally, the latest version of the Bill extends the notice of industrial action required from seven to ten days, giving employers a bit more time to prepare.

The Bill still requires approval from the Lords, after which it will likely move back and forth between the two Houses before ultimately receiving Royal Assent, which is expected by this summer at the earliest.

National Minimum Wage and Living Wage to increase this month

As of April 2025, the UK will implement substantial increases to the National Minimum Wage (NMW) and National Living Wage (NLW), which will directly impact employers across the country. These hikes form part of the government’s ongoing efforts to raise living standards, but they represent a significant increase in costs for businesses, particularly in the backdrop of rising National Insurance Contributions (NICs).

The NLW, which applies to workers aged 21 and over, will rise by 6.7%, from £11.44 to £12.21 per hour. The NMW for younger workers will see even larger increases. The wage for 18 to 20-year-olds will increase by 16.3%, from £8.60 to £10.00 per hour while those aged 16 to 17, as well as apprentices, will see an hourly rate rise of 18%, from £6.40 to £7.55.

Over the five-year period from April 2020 to April 2025, the NMW has experienced substantial hikes. For workers aged 25 and over, the rise amounts to 39%, while those aged 21 to 24 will see a 47.6% boost. The most significant increase is for workers aged 18 to 20, who will benefit from a 55% rise.

Employers, especially those in industries like hospitality and retail, where many workers are on lower wages, will undoubtedly feel the financial strain of these increases, which may lead to redundancies and restructures in an effort by employers to streamline their businesses, and consequently, an uptick in insolvencies and claims being brought in the employment tribunal.

TPR reports shift towards fewer, larger pension schemes as DC Market consolidates

The defined contribution (DC) pensions market is undergoing significant changes, with fewer, larger pension schemes dominating, according to new data from the Pensions Regulator (TPR). The '2024 DC landscape' report reveals that the number of DC schemes decreased by 15% in 2024, dropping below 1,000 for the first time, with 920 schemes reported. This reduction is primarily driven by the decline of schemes with fewer than 5,000 members. TPR has actively encouraged consolidation, focusing on small schemes that may not provide value for money to savers.

TPR research shows that smaller schemes often exhibit poorer governance, with only 17% of small schemes conducting required value-for-money assessments. The report also highlights growth in the number of DC members, up 6% to 30.6 million, and an increase in assets from £164 billion in 2023 to £205 billion in 2024. Master trusts dominate the DC market, holding 91% of memberships. TPR's ongoing initiatives, including penalties for non-compliance, aim to ensure that schemes provide adequate value to members, further encouraging consolidation and improved outcomes.

The consolidation of the DC pensions market is taking place at the same time as we see an increased level of buy-out/buy-in activity – reducing the number of final salary / defined benefit schemes.  Reports indicate that during 2024 we saw the UK pension deal market reach £47.6 billion, marking the second-highest level on record, according to Hymans Robertson.

To read TPR's statistic publication, click here.

TPR secures £25.5m additional funding for MGN pension scheme

TPR has secured £25.5 million in additional funding for the MGN Pension Scheme from Reach Plc. The funding, spread over five years, will ensure the scheme is fully funded by January 2028. TPR's regulatory intervention followed a failure to agree on the triennial valuation between Reach Plc and the MGN Pension Scheme. TPR's report details its response and its role in ensuring pensions are adequately funded.  TPR worked with the trustee and Reach Plc to resolve the issue, with the company now committed to paying £46 million annually to cover the scheme's deficit, up from the previous £41 million. This ensures the scheme's long-term sustainability and protection for its 5,490 members.

The development will be of interest to PTL insurers given PTL cover often includes an extension for regulatory costs.  TPR has a power – akin to the FCA's s.166 skilled person power – to put in place independent parties to consider a "stale-mate" when it comes to funding issues arising at the time of a triennial valuation so that the employer and trustees reach an agreement on ongoing funding including deficit recovery plans.  TPR has used the power sparingly and so its use here is a notable development and perhaps evidence of TPR's most interventionist approach when it comes to funding disputes.

To see TPR's intervention report, click here. 

Pension industry urged to enhance data practices for better outcomes

TPR has launched a new data strategy aimed at improving pension schemes, benefits for savers, and the broader economy. The plan encourages pension schemes to adopt higher data standards to drive efficiency, foster innovation, and reduce regulatory burdens.

With many pension schemes still holding non-digital data, TPR's strategy hopes to address risks like data inconsistencies and security issues, particularly as the DC market consolidates. TPR plans to modernise data collection, collaborate with industry partners, and promote new technologies, including AI, to improve productivity and saver outcomes. TPR has also confirmed that it will create a working group to drive responsible innovation in pensions, ensuring the use of AI aligns with ethical standards and delivers tangible benefits.

The development is important in the context of the upcoming pensions dashboard.  It is also of note that TPR has powers to issue improvement notices when it comes to data and so PTL insurers providing regulatory costs cover will want to bear this in mind in the run up to the start of the pensions dashboard as we are likely to see an increased focus on data quality.

Pensions Dashboard standards launched

The Pensions Dashboard Programme (PDP) has now published standards relating to the practical operation of pension dashboard services and the digital infrastructure needed to support them.  The implementation of pension dashboards aims to improve transparency and accessibility to pension information through a secure online platform. The goal is to help individuals find both their current and 'lost' pensions, view their pension pots, and estimate retirement income, empowering them to make informed decisions regarding their retirement.

The Standards

The Standards are a set of rules for those connecting to the pensions dashboards to ensure consistent operation. After consultations in 2022 and 2024, the PDP finalised the updated Standards, approved by the Secretary of State for Work and Pensions on 4 March 2025. The Standards are divided into four categories:

1. Data Standards. These define how providers and schemes must format and deliver pension data, ensuring consistency when returning information to the dashboard system.
2. Technical Standards. These specify the connectivity mechanisms and protocols required for secure interactions within the dashboard ecosystem.
3. Code of Connection. This outlines requirements for providers and schemes to remain connected, including security, service, and operational standards, to ensure proper management of the dashboard system.
4. Reporting Standards. These standards govern the operational information providers must generate and retain. Reporting will be initially required only upon request from the Money and Pensions Service or regulators, with routine reporting expected by October 2025.

Next Steps

The updated standards apply to pension providers, schemes, and any third parties acting on their behalf, such as developers and IT providers. The first tranche of providers and schemes is scheduled to connect by 30 April 2025, at which point their compliance with the standards will be tested. Further standards, particularly design standards, are expected to be published soon as the system develops.

These efforts are intended to ensure a smooth rollout of pensions dashboards, providing better oversight and management of pension data across the UK.

Work and Pensions Committee to hold evidence session on online Pensions Dashboards

The House of Commons Work and Pensions Committee held an evidence session on 5 March 2025 to assess progress on online pensions dashboards, which aim to allow individuals to access information on all their pension pots in one place. While the government’s MoneyHelper dashboard has no set launch date, pension schemes and providers must have their data ready by 31 October 2026.

During the session, MPs questioned industry representatives on their readiness for the 2026 deadline and their experiences with commercial dashboards. The Financial Conduct Authority (FCA) and TPR discussed regulatory collaboration, while the Department for Work and Pensions' Money and Pensions Service provided updates on the phased connection of data to the dashboards, aiming to avoid technical issues.

The Committee is expected to publish its report on the session in due course, providing further insights into the progress and challenges facing the pensions dashboards initiative.

Pensions Ombudsman ruling highlights trustee responsibilities in preventing pension scams

The Pension Ombudsman (TPO) has dismissed a complaint concerning a trustee's alleged failure to carry out sufficient due diligence and notify the member of potential scam warning signs before transferring his pension benefits to another occupational pension scheme.

Background

In Feb 2013, TPR launched a campaign to raise awareness around pension liberation fraud. TPR issued guidance, including the "Scorpion leaflet", to help trustees identify potential scams. The Scorpion leaflet highlighted various warning signs such as unsolicited calls about free pension reviews, offers of accessing pensions before age 55, and newly registered pension schemes.

Around this time, Mr. N, a member of an occupational pension scheme, approached an unregulated advisor, North West Alternatives (NWA), who encouraged him to transfer his pension benefits to another occupational pension scheme, the Bothbridge Pension Trust. At the time, Mr. N was employed and over the age of 55, which meant he was eligible to access his pension benefits. Following his request, the ceding scheme's trustee provided the necessary transfer forms and recommended that Mr. N seek independent financial advice before proceeding with the transfer.

The trustee initially rejected the transfer request and Mr. N objected, explaining that he had visited NWA's office and believed it to be a legitimate business. After reconsidering the request, the trustee decided to approve the transfer in July 2013. As a result, Mr. N's pension benefits were transferred, and he received a tax-free lump sum from the receiving scheme.

In 2016, the receiving scheme, Bothbridge Pension Trust, went into liquidation, leading to significant losses for Mr. N. In response, Mr. N filed a complaint, alleging that the trustee had failed to follow the Scorpion guidance on pension scams. He argued that the trustee should have refused to transfer his pension benefits, given the signs of a potential scam, particularly the receiving scheme's newly registered status with HMRC and the involvement of unregulated parties. Mr. N contended that the trustee had not adequately protected him from the risk of losing his pension savings.

The Decision

TPO did not uphold the complaint, finding in favour of the trustee. TPO acknowledged that Bothbridge Trust's newly registered status was indeed a risk factor but stated that it was not, in itself, sufficient to block the transfer. The trustee had followed the necessary due diligence procedures at the time, which included initially refusing the transfer until Mr. N provided additional information. Additionally, the trustee had provided Mr. N with transfer forms, recommended independent financial advice, and requested proof of his identity.

Crucially, TPO found that Mr. N had been made aware of the risks through the Scorpion leaflet, even though he had not received it directly from the trustee. Despite this, Mr. N proceeded with the transfer, suggesting that he was fully aware of the risks but chose to move forward for reasons including the promise of a tax-free lump sum.

To read the full decision, click here.

Pension Ombudsman rejects complaint that trustees had acted unreasonably during pension transfer

TPO refused to uphold a complaint alleging that trustees had acted unreasonably when following instructions to transfer the pension to a qualifying recognised overseas pension scheme (QROPS) which proved to be a scam.

Background

The complainant was a member of the Chevon UK Pension Plan (the Plan), managed by Chevron UK Pension Trustee Ltd (the Trustee). The administrators of the Plan received a request from Wefindanypension.com for information relating to the complainant's benefits. The signed letter of authority contained an FCA registration number for 'Archers Wealth Management Ltd'. The administrator recommended that the complainant seek financial advice and allegedly attached a copy of TPR's Scorpion leaflet.

The administrators later received the transfer paperwork indicating that the complainant wished to transfer to a QROPS. The administrators also received a completed "member's application to the Trustee" form from the complainant's IFA, Global Partners Ltd (GPL), which included a declaration that the complainant had read and understood the Scorpion leaflet. On receipt of the requisite documentation, the administrators proceeded with the transfer request.

Sometime after the transfer, the complainant became unable to ascertain the precise whereabouts of his pension funds. The complainant filed a complaint against the trustee arguing that:

• he had received a cold call from an unknown firm regarding the transfer;
• GPL were not regulated by the FCA;
• he had not received a copy of the Scorpion Leaflet; and
• the nature of the receiving scheme was not suitable for him.

The trustee dismissed the complaint on grounds that:

• it had provided the Scorpion Leaflet;
• it had followed the necessary due diligence checks;
• GPL appeared to be authorised by the Financial Services Commission in Gibraltar; and
• ·neither the administrator, nor the Trustee, could advise members on the suitability of their transfer choices and given that there were no evident barriers to the transfer, the administrator had a duty to give effect to the request.

The Decision

TPO did not uphold the complaint. While TPO did express sympathy for the complainant being a victim of fraud, the complaint was against the Trustee and it could only consider the matter in relation to their duties. They concluded, on a balance of probabilities, that the complainant had received the Scorpion Leaflet, having signed a declaration on two separate occasions confirming he had read it. TPO believed that the reference to Archers Wealth Management Ltd in the letter from Wefindanypension.com was in fact used to clone authorisation from another regulated entity.

TPO also considered that the Trustee had carried out appropriate due diligence in accordance with industry standards at the time. They noted that there was no requirement for the complainant to seek regulated advice at the time of the transfer, nor was there a requirement for the Trustee to perform due diligence to determine the regulated status of an IFA.

TPO was also satisfied that the complainant had a statutory right to transfer and the Trustee therefore had an obligation to proceed with the transfer request.

To read the full decision, please click here.

House of Lords Economic Affairs Committee launches pension and workforce ageing inquiry

The House of Lords Economic Affairs Committee has launched an inquiry into how tax and pension systems influence older workforce participation. The inquiry will explore existing incentives, policies to encourage longer working lives, and strategies for recruiting and retaining older workers. Key questions include the impact of pension arrangements on workforce participation, government policies to support later-life employment, and the economic effects of increased participation among older workers. Written evidence submissions are invited until 28 April 2025.