Court of Appeal overturns 'wrong' High Court decision to block £12bn annuity transfer

The Court of Appeal has overturned a High Court ruling to block the transfer of a £12bn portfolio of annuities from Prudential Assurance Company to Rothesay Life, stating that the original judge was "wrong" on a number of issues.

The ruling, issued today (2 December), has upheld all of the central issues highlighted by the appellants, confirming that these “errors” mean that the judge’s original decision cannot stand.

It also confirmed that the renewed application for the sanction of the scheme will be remitted back to the High Court, stating however, that it would be "preferable" for the renewed sanction hearing to be heard by a new judge.

In particular, the ruling stated that Justice Snowdon had been wrong to find that there was a material disparity between the non-contractual external financial support potentially available for each of Prudential, now M&G, and Rothesay.

Furthermore, it stated that the likelihood of non-contractual parental support being available in the future was not a relevant factor for the judge to take into account anyway.

It also found that the judge had been wrong to think that the parameters set out by the independent expert and Prudential Regulation Authority were not justified, stating that these did represent "valid parameters for Rothesay’s future security".

Furthermore, it said that the judge had not given enough weight to the conclusions of the independent expert that the risk of Prudential or Rothesay needing external support in the future was remote, or to The Pension Regulators’ lack of objection to the scheme and its continued future regulation of Rothesay.

The High Court initially blocked the transfer in August 2019 after concluding Rothesay did not have the same reputation and financial stability as Prudential, which may have influenced people's decision to purchase the Prudential annuities.

However, the Court of Appeal has now stated that the judge should not have accorded any weight to these policyholder concerns, stating that if their prospects of being paid are essentially the same, "it is hard to see how there could be any material adverse effect on the policyholders’ security of benefits caused by the scheme".

Rothesay has since welcomed the judgment, stating that the decision provides "important clarity" for the whole sector.

Commenting on the ruling, Hymans Robertson partner, Michael Abramson, stated: “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.”

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