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
- The Civil Partnership (Opposite-sex Couples) Regulations 2019
- The Local Government Pension Scheme (Amendment) Regulations 2019
- Consultation: The Occupational and Personal Pension Schemes (General Levy) review 2019
- FCA: Statement on MiFID II inducements and research
- Regulators publish scams analysis
- New Task Force on Climate-Related Financial Disclosures pensions industry working group
- Report: “Why UK pension funds should consider cyber and data security in their investment approach”
- PPI publishes “Generation veXed: solving the retirement puzzle”
- TPR authorises final master trust
- WPC publishes Government and FCA responses to report on pension costs and transparency
The Civil Partnership (Opposite-sex Couples) Regulations 2019 were published on 11 November 2019. They come into force on 2 December 2019.
The Civil Partnership Act 2004 introduced civil partnerships for same-sex couples. These new regulations give effect to a Government commitment to extend civil partnerships to opposite-sex couples in England and Wales.
Trustees of occupational pension schemes should check whether any amendments are needed to their scheme rules, in particular to ensure death benefits may be distributed to opposite-sex civil partners.
Following the extension of civil partnerships to opposite-sex couples (see above), the Local Government Pension Scheme (Amendment) Regulations 2019 set out how this affects the survivor benefits which would be payable on account of members of the LGPS who enter into such relationships. They come into force on 31st December 2019.
Public sector schemes like the LGPS will generally pay benefits based on a deceased husband’s service since 6 April 1978, but on a deceased wife’s service from 6 April 1988. This is because of historical differences in social security benefits and National Insurance contributions.
When survivor benefits were first introduced for same-sex civil partnerships these were based on the scheme member’s membership from 6 April 1988. In response to the Supreme Court case of Walker, the Government has agreed to amend all public sector schemes so that for same-sex civil partners, all service from 6 April 1978 is now included.
However, Government policy is that public sector pension schemes should pay the same survivor benefits in relation to opposite-sex civil partnerships as they would for those in opposite-sex marriages. This means that a male survivor of an opposite-sex civil partnership would be treated the same as a widower in a traditional marriage (only receiving benefits based on the member’s service from 6 April 1988). These regulations therefore distinguish between the benefits payable depending on whether the relevant scheme member was in a same-sex or opposite-sex civil partnership.
On 18 October 2019, the DWP published a consultation on the options to raise the general levy rates from April 2020 (see 7 days). On 5 November 2019, it extended the consultation closing date from 15 November to 29 November 2019.
The US SEC (US Securities and Exchange Commission) has announced an extension of the SEC staff ‘no action letter’ (which addresses the potential conflict between US regulation and MiFID II’s inducements and research provisions) until 3 July 2023. The existing relief was due to expire on 3 July 2020. The FCA welcomes this.
During the remainder of the current period and the extended period of the no-action relief, broker-dealers subject to the US regime may receive payments for unbundled research from firms subject to MiFID II or equivalent rules of EU member states without being considered an investment adviser under US law. This will also apply to UK firms in the event of EU withdrawal before or during the extended period.
The FCA’s own multi-firm review findings published in September 2019 found that rules have improved asset managers’ accountability over costs, saving millions for investors. It intends to carry out further work in 12 to 24 months’ time to assess firms’ ongoing compliance with its rules and developments in the market for research.
On 8 November 2019, TPR and the FCA revealed that analysis from their joint ScamSmart campaign shows it could take 22 years for a saver to build a pension pot of £82,000 – the average amount victims lost to scams in 2018. Despite this, the research also indicates that almost 1 in 4 people (24%) surveyed admitted to taking 24 hours or less to decide on a pension offer.
Overconfidence could also lead to savers missing the signs of a scam. Despite nearly two-thirds (63%) saying they are confident making decisions about their pension, the same proportion (63%) would trust someone offering pensions advice out of the blue – one of the main warning signs of a scam.
Further still, the more highly educated the person, the more likely they are to fall for a pension scam. Those with a university degree are 40% more likely to accept a free pension review from a company they’ve not dealt with before, and 21% more likely to take up the offer of early access to their pension pot – both common scam tactics.
As a result, the regulators are warning savers to get to know the warning signs of a scam, be ScamSmart and always check who they are dealing with before making a decision on their pensions.
In 2017 the Task Force on Climate-Related Financial Disclosures (“TCFD”) published a framework through which exposure to climate-related financial risks can be assessed, reduced, managed and disclosed. It recommends disclosures should be made under the four broad headings of:
- risk management and
- metrics and targets.
A new working group has been set up to explore the recommendations from the TCFD and provide guidance for assets owners to support them in complying with the 2022 requirements outlined in the Green Finance Strategy. The group includes representatives from the DWP, BEIS, TPR and a number of other pensions industry and civil society bodies. It is chaired by Stuart O’Brien, a partner at Sackers and a member of the Task Force which produced the PLSA’s recent ESG and Stewardship guidance.
On 6 November 2019, Nest and RPMI Railpen (Railpen) jointly published a report which analyses the fallout from cyber-attacks and how the two pension schemes are approaching the topic. It includes details of high-profile cyber-attacks on businesses over the past decade and recommendations on how pension schemes can lower the cyber-attack risk in their portfolios.
On 7 November 2019, the PPI published “Generation veXed: solving the retirement puzzle”. This report compares the financial wellness of Generation X to the preceding generation, Baby Boomers, and the following generation, Millennials. It explores the risks they face in later life and how policy, industry and employer interventions could mitigate them.
On 5 November 2019, TPR announced that the final master trust has been authorised and the process for existing schemes has ended. To gain authorisation these schemes have proved to TPR that they are run by fit and proper people, have sufficient financial reserves, and robust plans and systems in place.
Master trusts have grown significantly due to automatic enrolment, which has seen 10.2 million people newly saving or saving more for retirement. 50% of employees who have been automatically enrolled into a pension are saving into a master trust.
Nicola Parish, Executive Director of Frontline Regulation at TPR, said: “These tough new requirements better protect the 16 million pension pots in master trust schemes, which people will rely on in their retirements. More than 50 schemes leaving the market shows that these laws are demanding – and rightly so. It is right that people saving for their retirement should be in a scheme which adequately protects their pension pots and which they can have confidence in. The 37 authorised master trust schemes will continue to be closely supervised by us to make sure they continue to operate within the law. We will also expect them to set an example for the rest of the pensions industry – to have their data in shape ready for the Pensions Dashboards, to be at the forefront of considering climate change in their investments and ensuring that savers are getting value from their pensions.”
On 2 November 2019, the WPC published the Government and the FCA’s responses to its report on pension costs and transparency.
In particular, the Government:
- confirms that it intends to review the level and scope of the charge cap, as well as permitted charging structures, in 2020
- is “actively considering” a consultation on legislation to encourage use of the CTI disclosure templates (see 7 days) and
- accepts the recommendation that it should now take a leading role in ensuring that schemes adequately prepare their data ahead of launch of the pensions dashboards and that the project delivers the full benefits to consumers. It has asked MaPS to bring together the Industry Delivery Group (“IDG”) to drive and maintain progress on the delivery of the technology that will enable dashboards to work and has said that the majority of schemes will need to be ready to go live with their data within a three to four-year window. The details of that timetable will be informed by the IDG.