7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.
In this 7 Days
- Coronavirus – Sackers response
- Consultation: taking action on climate risk
- HMRC issues Pension Schemes Newsletter 123
- LGPS consultation response: employer contributions and exit payments
- PLSA guide on climate indexes
- TPR’s quarterly compliance and enforcement bulletin
- TPR blogs on DB funding and the impact of COVID-19 on AE
At Sackers we are committed to ensuring that the Coronavirus outbreak causes minimal disruption for our clients, and have taken several steps to ensure it is ‘business as usual’. For details of these steps, as well as key points for trustees and employers to consider in light of the outbreak (which we will continue to update), please see the dedicated section of our website, or talk to your usual Sackers contact.
On 26 August 2020, the DWP published a consultation on pension schemes’ governance and reporting on climate change. Initially, the proposed changes would be targeted at larger schemes, which would need to comply from October 2021. The proposals would require schemes to assess and manage climate risks and opportunities, and to publish a climate change report annually (in line with recommendations by the TCFD). The consultation runs until 7 October 2020.
The key points from the consultation are:
- schemes with £5 billion or more in assets, authorised master trusts and authorised collective money purchase schemes (“CMPS”) would need to have arrangements in place on climate change governance, strategy, risk management, metrics and targets from October 2021, and to publish an annual report on these by the end of 2022 at the latest
- this requirement would then be rolled out to schemes with £1 billion or more of assets the following year. Application to smaller schemes will be reviewed in 2024
- compliance would be reported to TPR through the annual scheme return
- the proposed requirements would be enacted under amendments to the Pension Schemes Bill, though these are yet to be passed. A further consultation on regulations will follow “in late 2020 or early 2021”
- the consultation does not include requirements to report on alignment with the Paris Agreement or the “implied temperature rise” of scheme portfolios. The Government “is minded to take steps to require that pension scheme trustees do this”, and this will be consulted on “in the near future”.
For more detail, please see our Alert.
On 28 August 2020, HMRC published Pension Schemes Newsletter 123. The newsletter covers a number of issues, including:
- requirements for relief at source, including the annual return of information, interim repayments and residency status reports, and a reminder to scheme administrators operating relief at source that they must submit the APSS106 – registered pension schemes relief at source annual claim for 2019/20 to HMRC by 5 October 2020
- guidance on migration to the Managing Pension Schemes Service, including where schemes have multiple scheme administrator IDs or scheme practitioner IDs, and details of HMRC’s process for looking at pension scheme accounting. HMRC is starting to write to scheme administrators with details of payments and charges that are unallocated, asking for more information, and where payments are outstanding it will ask for the outstanding amount to be paid
- a repeat of the reminder from Pension Schemes Newsletter 122 that the deadline for issuing AA pension savings statements for the tax year 2019/20 is 6 October 2020.
On 26 August 2020, the MHCLG published a further partial response to its consultation on proposals to amend the rules of the LGPS in England and Wales (see 7 days). This follows an earlier partial response in February, which dealt with exit credits (see 7 Days).
The response covers proposals on employer contributions and flexibility on exit payments. It concludes that administering bodies and employers should be granted more flexibilities in relation to reviewing employer contributions during the inter-valuation period. It also concludes that administering authorities should be given a power to spread exit payments from an exiting employer over a period where the employer no longer has active members in the scheme.
Regulations on these changes were laid before Parliament on 27 August 2020 and will come into force on 23 September. A further response will be issued on the remaining proposals in the consultation “in due course”.
On 24 August 2020, the PLSA published a guide on “climate indexes made simple”. The guide is intended to help trustees to “understand how climate change indexes work and how they can help mitigate risk and promote good stewardship”. It aims to illustrate “how equity and fixed income indexes can be a relevant tool for institutional investors in portfolio construction”. It also aims to “present how climate risk indexes may be used as part of an approach to manage climate-related risks and integrate them into the investment process”.
On 27 August 2020, TPR published its quarterly compliance and enforcement bulletin for April to June 2020, providing information about its cases and the powers it has used. TPR believes that the figures highlight how it has “supported employers through the upheaval caused by the pandemic”, noting that “temporary flexibilities led to a 55% fall in the use of powers” compared to the previous quarter. TPR “has not seen a significant or unusual spike in missed pension contributions”. The publication of the bulletin comes as TPR launches a new advertising campaign “reminding employers that while their workplace has changed due to COVID-19, their pensions duties towards their staff remain the same” (see below).
On 25 August 2020, TPR published a blog on some of the “key proposals” from its first consultation on DB funding (see our Alert), which closes on 2 September. It answers a number of commonly asked questions, including what the twin-track approach is, how TPR is proposing to regulate the Bespoke option and what the DB code means for open schemes. The blog was accompanied by a webinar on the future of DB funding, which covers the twin-track approach, how TPR could develop fast track guidelines and how the bespoke framework could work in practice.
This was followed by another blog, published on 27 August 2020, on the impact of COVID-19 on AE. The blog describes TPR’s “pragmatic approach” to enforcement during COVID-19, and states that those temporary changes are borne out in the compliance and enforcement bulletin (see above). It notes that, “despite the challenges faced by businesses, the vast majority have continued to meet their automatic enrolment duties”. TPR will “continue to monitor employer compliance closely” and “will take a dim view of employers who seek to exploit the impact of COVID-19 to deliberately avoid their pension duties”.