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

Briefing papers on the Pension Schemes Bill and climate change risk

The House of Commons Library has published a new briefing paper which aims to provide context for the provisions in the Pension Schemes Bill that would “require occupational pension schemes to manage the effects of climate change effectively as a financial risk to their investments and to report publicly on how they have done so.”

It has also updated its briefing paper summarising the main provisions of the Pension Schemes Bill, setting out the issues debated during the Bill’s progress through Parliament.

Consultation on implementing the ban on corporate directors

On 9 December 2020, BEIS published a consultation on implementing the prohibition on corporate directors under the Small Business, Enterprise and Employment Act 2015. This prohibition was originally due to be implemented in October 2016, but was delayed by other priorities (see 7 days). A November 2014 consultation had proposed carve outs for specific types of company, including for  “trustee companies of pension funds”, but this was deemed “unwieldy and…complicated”, so was not taken forward.

The consultation proposes that instead regulations be made to provide for “principles-based exceptions” to the prohibition (as per the Government’s suggestions in 2015). Under these, a company may be appointed as a director provided that both:

  • all of its directors are, in turn, natural persons
  • those natural person directors are, prior to the corporate director appointment, subject to the Companies House identity verification process. Proposals for mandatory identity verification process for company directors were announced in September 2020.

The consultation closes on 3 February 2021.

Government further extends insolvency measures

The restrictions on presenting winding-up petitions and on the making of winding-up orders imposed by the Corporate Insolvency and Governance Act 2020 have been extended for a second time (see 7 days). These restrictions will now expire on 31 March 2021.

ICO warns public to be vigilant against pensions cold callers

Last year, the law changed to limit who can call people about their pensions. Now, companies can only phone and talk to people about their occupational or personal pensions if:

  • the caller is authorised by the FCA, or is the trustee or manager of an occupational or personal pension scheme, and
  • the recipient of the call consents to calls, or has an existing relationship with the caller.

Fining a company for flouting the law by harvesting contact details from the internet and making more than 39,000 direct marketing calls, the ICO issued a warning to the public to be vigilant against such calls, and to report them to the ICO.

IFoA publish report on actuarial factors used to calculate benefits in UK pension schemes

On 8 December 2020, the IFoA published a Thematic Review Report on the actuarial factors used to calculate benefits in UK pension schemes. The report looks at current practices adopted by actuaries, including how factors such as commutation at retirement are determined for schemes, and how frequently these factors are reviewed.

The report highlights that, when advising trustees, actuaries should focus on explaining the range of factors affecting calculations for transfer values and commutation rates and the reasons for the difference between the two.

PPI issues briefing note on longevity inequality

On 9 December 2020, the PPI published a briefing note on longevity inequality. This briefing note focuses on the inequalities in life expectancy and healthy life expectancy, looking at potential reasons why these inequalities exist and the implications of this for retirement income. Policy options which could help reduce the inequality are also explored.

Public sector exit payments – CSCS consultation, and judicial review

The Cabinet Office has launched a consultation seeking views on the changes required to the terms of the Civil Service Compensation Scheme (“CSCS”) to take account of the effect of the £95,000 cap on public sector exit payments which came into effect on 4 November 2020.

The consultation closes on 3 February 2021 and the outcome will be taken into account by HMT when reviewing the directions and guidance relating to the Exit Payment Regulations.

In addition, on 8 December 2020, public sector union the FDA announced that it is seeking judicial review of the exit payment cap.

Scheme returns – reminders and documents

TPR will start to issue scheme return notices from the end of January 2021. Ahead of this, it has updated its guidance on DB and mixed benefit scheme returns, and published an example 2021 return.

The guidance notes that DB schemes should be prepared to answer “two additional questions that may be added” if TPR updates its systems, where a scheme would have to provide:

  • a website link to its published SIP
  • its assessment of the employer covenant grade – and where it would fall in TPR’s grading system.

TPR also encourages schemes to consider downloading PDFs of previous years’ returns from Exchange, as, with its planned system upgrade, these may no longer be available after 31 December 2020.

TPR will contact schemes in January to confirm the final version of its questions, and whether the system updates will be in place for scheme return submissions. It also notes that it is allowing more time to complete and submit the scheme return (until 31 March 2021).

TPR comments on responses to first DB funding code consultation

TPR has published a blog post reflecting on the responses received to its first DB funding code consultation.

TPR is currently considering whether any of the principles set out in its first consultation need to be adjusted and has yet to firm up the proposals for its second consultation. These proposals will be informed by responses to the first consultation, an impact assessment and the final legislative package.

The blog post also briefly addresses de-risking, open and immature schemes, TPR’s “Fast Track” and “Bespoke” proposals, and the “importance of liquidity”.

TPR is expected to carry out its second consultation on the DB funding code in mid-2021.

TPR warns employers to keep contact details up-to-date

TPR has updated its coronavirus guidance for employers on automatic enrolment and DC pension contributions to include information on nominating a contact for TPR to send important information to.

As a result of the coronavirus pandemic, businesses may have restructured and personnel may have changed or moved on — some of whom may have been designated as contacts for TPR to send important communications to. TPR reminds schemes that it is “especially important” that it has the right contact details, otherwise vital messages may not reach the right people (eg about automatic enrolment duties) and compliance may be at risk, ultimately leading to fines being imposed.

If an employer believes that its contact details may be out-of-date, TPR strongly recommends that they use its Nominate a contact form without delay to tell TPR who the best person is for it to communicate with.