7 days

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

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.

FCA consults on additional levy

On 5 August 2020, the FCA published a consultation on levies to raise an additional £14.2m of funding in 2020/21 for MAPS’ debt advice in England (applicable to fee payers that contribute towards this already). This is “to enable MAPS to respond to the coronavirus (Covid-19) crisis and the expected increase in debt advice”. The FCA must also collect an additional £2.087m for the provision of debt advice in Scotland, Wales and Northern Ireland.  The consultation closes at the end of September, with firms being invoiced from December 2020.

Guidance on GMP equalisation communications

On 4 August 2020, the cross industry GMP Equalisation Working Group published guidance on member communication in relation to GMP equalisation. The guidance is designed for schemes in the early planning stages of GMP equalisation, where they are considering “how they will approach their communications, how they will work effectively with their administrators, and what they really need to say to their members”. It will be followed by further guidance covering the implementation stage.

The guidance includes:

  • broad principles schemes can follow when planning their communications to members
  • potential member questions and answers that schemes can use as a starting point to respond to members
  • a checklist of the communications to members which may need to be reviewed in light of GMP equalisation
  • a jargon buster guide for schemes to help avoid using words and phrases members may find confusing.

TPR blog: “Trustees must remain ready for COVID-19 balancing act”

On 5 August 2020, TPR published a blog explaining what DB trustees “can expect from the regulator and how to prepare as the economic impact of the coronavirus continues to hit schemes and sponsoring employers”.

The blog notes that TPR has received 108 revised recovery plans. Of these, almost 86% have seen schemes agree to defer their employer’s deficit repair contributions (“DRCs”). The “majority were from small schemes and relate to sectors under increased strain from the impact of COVID, such as the manufacturing, retail and airline industries”.

TPR “expects more COVID-linked insolvencies in the autumn and during 2021 and more companies to be looking at restructuring”. Trustees “should be open to reasonable requests from an employer in distress but must make an informed decision if it’s in members’ best interests to agree”. If it is “judged necessary and appropriate to suspend or reduce contributions from an employer experiencing financial distress, trustees should seek appropriate mitigations”.

In restructuring situations, TPR’s supervision teams “will expect trustees to have a robust plan, which may include bolstering the expertise of the trustee board and seeking professional advice”. Trustees “may need to look beyond their usual advisers and not be limited to just covenant advice but also on understanding their scheme’s position and options during restructuring and insolvency”. They should consider conflicts and keep clear records of the basis of decisions.

TPR will, “in due course”, highlight important messages for other scheme types, including DC, master trusts and automatic enrolment schemes.

TPR response to WPC report on COVID-19

A letter from TPR to the WPC was published on 4 August 2020, responding to the parts of the WPC report on the DWP’s response to the COVID-19 outbreak (see 7 Days) relevant to TPR.

In relation to auto-enrolment, TPR understands that “smaller employers may find it extremely challenging to keep up with payment obligations”, noting that the Government’s Coronavirus Job Retention Scheme (“CJRS”) is due to end in October and “the hardest times may still be ahead for many employers”. TPR will keep its approach “under review as the impacts of the pandemic continue to unfold”.

In response to concerns on re-enrolment, TPR notes that it does not have powers to bring re-enrolment dates forward, or to encourage employees to opt back in to schemes early. TPR is “not seeing widespread cessations or opt outs, but there are some”, so it continues to monitor the situation and will update its guidance “when appropriate”. TPR will “keep this situation under careful review”.

The letter announces that the Cabinet Office has approved funding to run a campaign from August to “remind employers they have ongoing duties regardless of whether staff are furloughed or not under CJRS”.

TPR runs through actions it has taken in relation to DB schemes, and echoes its guidance, saying that, while it expects there will be a need for DRC deferrals to continue, “trustees should only consider them for an employer with immediate or demonstrable cashflow problems and after undertaking due diligence. We expect pension schemes to receive equitable treatment compared with other creditors and shareholders”.

In relation to pension scams, the WPC’s “focus on the danger of scams is very welcome”. TPR remains “committed to tackling pension scams and part of this is continuing to raise awareness amongst savers that scammers are out there and are targeting retirement savings”.