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
- Briefing paper on Pension Scheme Investments and Climate Change
- Briefing paper on Social Security (Up-rating of Benefits) Bill published
- DWP confirms member tracing-service unavailable for matrimonial and divorce matters
- DWP guidance on transgender women and backdated state pension
- EIOPA supervisory opinions
- Public service pensions: cost control mechanism consultation response
- ICO data sharing code of practice
- PPF seeks new specialist panel for 2022
- TPR’s clearance guidance has been updated
- TPR updates investment governance guidance on temporary closure of funds
On 7 October 2021, the House of Commons Library updated its briefing paper on Pension Scheme Investments and Climate change, which looks at the requirements on pension schemes to take account of the risks and opportunities of climate change in their investments and report on how they have done so (see our Alert).
On 6 October 2021, the House of Lords Library published a briefing paper which summarises the background to the Social Security (Up-rating of Benefits) Bill (relating to the temporary suspension of the “triple lock” (see 7 Days)) and the House of Commons stages that were taken on 20 September 2021.
On 5 October 2021, the DWP made a minor amendment to its guidance on its member tracing and bulk forwarding service where, for a small fee, the DWP will forward any communication from a pension scheme or insurance company that is addressed to an untraceable individual, provided certain requirements are met. This service is often used when winding up occupational pension schemes. The service is only available to notify individuals about “beneficial information” and every effort must have been made to trace an individual before the service is used. The guidance now confirms that the service is unavailable “in respect of matrimonial and divorce matters”.
On 4 October 2021, the DWP published guidance on how transgender women can apply for backdated state pension. Transgender women born between 31 October 1953 and 6 November 1953 may be eligible to receive the state pension from 31 October 2018 to the date of their 65th birthday. This is because a court ruling means that a transgender person who has had gender reassignment surgery and lived in their acquired gender for a significant period must be recognised in their acquired gender for state pension purposes. The guidance includes details on how to apply.
On 7 October 2021, EIOPA published two opinions on the supervisory reporting of costs and charges by IORPs and the risk assessment of IORPs that provide DC schemes. The opinion on the supervisory reporting of costs and charges of IORPs sets out the expectations and a classification of costs to be reported to national supervisors. The opinion on the risk assessment gives guidance on aspects of risk management by DC IORPs.
On 4 October 2021, HMT published a response to its June 2021 consultation on the cost control mechanism in public service pension schemes (see 7 Days). The consultation proposed three changes to the mechanism recommended by GAD with the intention of establishing “a fairer balance of risks” between taxpayers and scheme members, and creating a more stable mechanism. HMT has confirmed that all three will be implemented.
HMT is aiming to implement all three proposals in time for the 2020 valuations. While one of the proposals can be implemented in secondary legislation, the other two will require amendments to primary legislation and subsequent HMT directions, when Parliamentary time allows.
HMT also published the Public Service Pensions (Valuations and Employer Cost Cap) (Amendment) Directions 2021 on 7 October 2021. These Amending Directions allow schemes to conclude their 2016 valuations by setting out how they must carry out the cost control element of those valuations.
The ICO has updated its Data sharing information hub, confirming that a new version of its data sharing code of practice came into force on 5 October 2021. This statutory code of practice, made under the Data Protection Act 2018, is intended to be a “practical guide for organisations about how to share personal data in compliance with data protection law”.
On 6 October 2021, the PPF launched a tender for a new specialist panel which will provide transaction advice (including actuarial and investment advice) to schemes in PPF assessment which are overfunded on a PPF basis (“PPF+”).
Dan Collins, the PPF’s Relationships Manager said “we continue to see more PPF+ schemes enter our assessment period… Our aim is for these schemes to exit the PPF assessment period as seamlessly as possible and ensure they secure the best possible outcome for members outside the PPF.”
The PPF plans to appoint the panel in February 2022.
- TPR notes that, as clearance does not apply to the new criminal offences, it has updated its guidance to reflect this
- in line with changes to the contribution notice (“CN”) regime, the concept of “relevant deficit” has been removed (certain events were not previously a “Type A event” requiring clearance if the scheme was funded to a particular level). Now, as the new CN tests focus on the section 75 funding position, an employer-related event can be a Type-A event notwithstanding that the scheme is fully funded on other bases.
On 4 October 2021, TPR updated its investment governance guidance for managing DC benefits with the inclusion of a new section on the temporary closure of funds leading to the creation of a default arrangement. The new section addresses the situation where certain funds containing illiquid assets temporarily close when there is market uncertainty (known as “gating”) and provides guidance on when gating may result in the creation of a default arrangement if members of DC pension schemes have chosen to invest in these funds, as well as guidance on transfer requests relating to gated funds.
As a general rule, the guidance suggests that a default fund is likely to be created unless “members were made aware before they selected the original fund that contributions could be diverted to another fund in certain situations” or trustees “contacted the members before diverting contributions and obtained their consent”; however, it indicates that trustees should take legal advice to assess their scheme’s position. Trustees should be aware of the consequences when a gated fund reopens and consider whether the pre-existing expression of choice still applies, or whether any further action or member consent is needed, which will depend on the individual circumstances.
The new section was previously included in TPR’s COVID-19 guidance for pension scheme trustees on DC scheme management and investment (see 7 Days), which has now been archived.