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
- Report proposes increased regulation of pre-packs
- Pensions Schemes Bill receives second reading
- Update to HMRC’s Pension Schemes Newsletter 124
- HMT launches public sector GMP indexation consultation
- PPF publishes report and accounts
- PRAG publishes updated guidance on cybercrime
- WPC publishes views on small pots and evidence on pension scams
- United Biscuits (Pension Trustees) Limited v HMRC (CJEU, 8 October 2020)
The Insolvency Service has published the outcome of a review into the effectiveness of the package of voluntary measures introduced in 2015 to improve creditor confidence in “pre-pack” sales in administration. Alongside the report, it published draft legislation intended to tighten the regulation of and transparency around pre-pack arrangements, in particular where the sale of a business is to a connected person.
There is no legal definition of a pre-pack sale in administration, but a pre-pack is generally understood to be an arrangement for the sale of all or a substantial part of a company’s business prior to the company entering formal insolvency (administration), after which the appointed administrator completes the sale, usually on day one of the administration, thereby rescuing the business in whole or part.
The report notes that “high-profile pre-pack sales have led to criticisms in the media that they are a means to avoid pension responsibilities”. As part of the review, the Government worked with the PPF to ascertain whether this is the case. The PPF has stated that it does not generally see any evidence that pre-packs are being used as a vehicle for abandoning pension liabilities, and in most cases it believes that it has reasonable engagement with companies ahead of a pre-pack sale.
Where the PPF has concerns, it will continue to refer them to TPR, which it believes has adequate powers to deal with any misuse of pre-packs. However, consideration will be given to referrals to the Pre-Pack Pool (an independent group formed to provide opinion on pre-pack deals) becoming mandatory.
On 7 October 2020, the Pension Schemes Bill 2019/20 (see our Alert) completed its second reading in the House of Commons. The Bill will now proceed to Committee stage, where it will be scrutinised line by line, and which is expected to complete on 5 November 2020.
A call for written evidence from interested parties has been opened.
On 6 October 2020, HMRC published an update to its Pension Schemes Newsletter 124, in which it confirms that the Coronavirus-related protected pension age easement (see 7 Days) will not be extended, and so will come to an end on 1 November 2020.
The Government is seeking views on how it “proposes to continue to meet past commitments” to public sector employees “regarding the full indexation of public service pensions, including any GMP element.”
The introduction of the new State Pension in 2016 removed the mechanism that enabled public sector workers to have their GMPs fully price protected. An interim solution was introduced, which was later consulted on (see our Alert) and extended until 5 April 2021 (see 7 Days).
The new consultation relates to those reaching SPA after 5 April 2021, and considers whether to make the current (interim) full indexation a permanent solution and, if not, for how long the Government should extend that before reconsidering GMP conversion or “a feasible alternative solution”.
The consultation closes on 30 December 2020.
On 8 October 2020, the PPF published its 2019/20 annual report and accounts. While its reserves decreased to £5.1bn at 31 March 2020, its assets grew from £32.1bn to £36.1bn.
Lisa McCrory, the PPF’s Chief Finance Officer stated that “while our reserves decreased year-on-year, we’ve seen a good recovery in the current financial year…We expect the macroeconomic situation to be tough for the foreseeable future but we’re confident in our ability to protect all current and future members.”
The report also provides an update on the PPF’s progress against its strategic objectives for 2019/22.
On 6 October 2020, the Pensions Research Accountants Group (“PRAG”) published updated guidance aimed at helping trustees protect their schemes from cybercrime. The guidance updates the previous version published in 2018 to reflect the “considerable” developments and growth in cybercrime since then.
The Work and Pensions Committee has written to Guy Opperman, Minister for Pensions and Financial Inclusion, to welcome the establishment of a working group to address the current problem of proliferating small pension pots (see 7 Days), and to share the views that the Committee had received to date on possible “workable solutions”.
The WPC has also published written evidence submitted by TPR to its pension scams inquiry, plus correspondence between it and the Government on the issue prior to the second reading of the Pension Schemes Bill.
The CJEU has followed the Advocate General’s earlier opinion in relation to a case regarding the VAT treatment of pension fund management services finding that such services supplied for an occupational pension scheme which do not provide any indemnity from risk cannot be classified as “insurance transactions”, and so do not fall within the relevant VAT exemption.
See our case report for further detail.