Magnus Miller

With the enactment of the Trust and Succession (Scotland) Act 2024 earlier this year, it is a good time to remind ourselves of the differences between Scots law and English law as they apply to pension schemes.

Firstly, it is worth noting that most – not all – of the pensions legislation governing private sector pension schemes is the same between the two jurisdictions.

Public service pension schemes, of course, are a different beast altogether and have different legislative frameworks north and south of the border, albeit again broadly similar.

The key differences between the two jurisdictions mainly arise from other non-pensions specific legislation and the underlying common law which applies to pension schemes.

Probably the biggest differentiator between the two is the applicable trust law which underpins most trust-based pension schemes, with Scotland having its own separate legislative framework (more on that below) and also its own case law.

What is “kilting” and what are the key differences between the two jurisdictions?

You may have heard of the term “kilting” – no, it is not the process by which a person is measured up for their (very Scottish) wedding attire. But rather a term often used by lawyers when adapting an English law document to ensure it is compatible with Scots law. 

We set out below some of the most important differences between English law and Scots law in relation to key legal principles to be aware of in a pension scheme context. And which may require some “kilting” as a result when preparing a Scots law governed pension scheme document.

The Requirements of Writing (Scotland) Act 1995

The word “deed” is a term that is used in English law. A deed is a written document that has been executed in accordance with the required formalities (e.g. in writing, clearly identified on its face as being a deed and being delivered as such) and by which an interest or right in “property” (i.e. any item that a legal person – including a business – has legal title over) is passed or confirmed or by which a binding obligation is confirmed or created on a person.

In contrast, Scots law does not recognise the distinction between documents that are executed as a ‘deed’ and those that are not (e.g. a contract).

In Scotland, under the Requirements of Writing (Scotland) Act 1995, deeds will either be valid or valid and probative (i.e. meaning self-proving – presumed that it has been validly executed).

So, under the 1995 Act, subscription (i.e. signing) alone is generally regarded as sufficient for the valid execution of a document.

However, if the document was to be challenged in the future in a court, it would still be necessary for the person seeking to rely on the document to lead evidence to prove that it has in fact been validly executed, i.e. that the signatories were the correct signatories and that the signatures were indeed their signatures, etc.

Counterparty signing

Scots law was slightly behind the pace of our English “counterparts” when it came to legislative provisions allowing the signing of documents in counterpart.

A document is signed in counterpart if each party signs a separate copy of the document. It is classed as a single executed document once all of the counterparts are collated together, or alternatively, all of the signature pages are compiled together in one document.

The Legal Writing (Counterpart and Delivery) Scotland Act 2015 formally introduced the concept into Scots law.

This Act brought Scots law broadly into line with the English position on the signing of documents in counterpart. It requires the entire document to be printed for valid counterpart signing (if being signed physically, rather than electronically).

Consideration

Consideration is an English law concept (where, very basically, some form of value needs to change hands in order for a contract to be valid). However, it is not required under Scots law and a contract can be formed simply by agreement on the essential terms of it without any consideration being given.

Given consideration is not always present in the context of pension scheme agreements, deeds are the usual “go to” form of document used by pension schemes. Where there is obvious value changing hands, contracts can be used in England.

In Scotland, it is not as critical under the law to determine the type of legal document to use, based on whether consideration is an element of the transaction (however, as our readers will know, pension scheme rules often dictate the type of documentation needed to implement various changes).

Limitation and prescription

At first glance, the concepts of ‘limitation’ and ‘prescription’ north and south of the border appear similar, but upon closer inspection there are important distinctions, and each is governed by its own legislation and common law.

Because of the very complicated nature of limitation generally we will not set out the differences here. Suffice to say there are different limitation periods as between Scotland and England and whether they apply and in what manner is very matter and fact specific which requires specialist legal advice from litigation lawyers (not pensions lawyers!) in the relevant jurisdiction.

On the topic of litigation, it should be noted that there are material differences between the two jurisdictions in terms of the conduct of pensions litigation and the courts’ approaches. There are often markedly different approaches taken by Scottish courts in comparison to English courts. However, that is an article in itself! Watch this space for more on that from our Scottish pensions and disputes team in the near future.

Trust law applicable to trustees of Scots law governed pension schemes

As mentioned above, trust law is materially different between the two jurisdictions.

The Trusts and Succession (Scotland) Act 2024 is now the primary piece of legislation in Scotland that governs the law on trusts, succession and estate executors.

The Act represented the first real overhaul in the law for the last 100 years and with it came new requirements for the appointment and removal of trustees and their power to make certain decisions. The 2024 Act also permits trustees to consider non-financial considerations when investing the trust property.

We have previously written an article on the 2024 Act that you can read here. At present, the 2024 Act specifically excludes Scottish pension scheme trusts (via the definition of “trusts”) as they are not considered to be a devolved matter for the Scottish Parliament to legislate on and it would need to be specifically sanctioned by Westminster.

However, it is expected that that will happen and that the Act will apply to Scottish pension trusts in due course. But even when it does, there are still some areas where pensions legislation will override the provisions of the Act (e.g. investment duties and powers).

Other areas

And there are areas of pure pensions law where the legislation differs between England and Scotland – for example, in relation to pensions sharing on divorce (largely as divorce law is very different in the two jurisdictions generally). There are distinct differences between the two regimes that should be carefully navigated depending on the jurisdiction of the pension scheme subject to the pension sharing provisions.

Even where a pension scheme is governed by English law, the issues mentioned above will still be relevant where there are Scottish members and beneficiaries.

Conclusion

In conclusion, there are key aspects of trust law, pensions legislation and non-pensions legislation applicable to pension schemes where the position north and south of the border can vary significantly.

As such, it is crucial that all interested parties in pension schemes (including trustees, sponsors and scheme advisers) are aware of these differences as they could be material (e.g. in conducting a pensions litigation and deciding if and where to raise proceedings).

Magnus Miller is a partner in Burges Salmon’s Edinburgh-based dispute resolution team