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

New legislation published

The following pieces of pensions increases and revaluation legislation have been published:

  • the Pensions Increase (Review) Order 2021 was made on 8 March 2021. It provides for increases in the rates of public service pensions, and comes into force on 12 April 2021
  • the Public Service Pensions Revaluation Order 2021 was made on 8 March 2021. It sets out the revaluation required by schemes under the Public Service Pensions Act 2013 for the year to 31 March 2021. The Order comes into force on 1 April 2021
  • the Social Security Revaluation of Earnings Factors Order 2021 was made on 8 March 2021. The Order aims to ensure that earnings factors relating to NICs for historic tax years, used in the calculation of additional State Pension and GMPs, maintain their value in line with the increase in average earnings in England, Scotland and Wales. The Order comes into force on 6 April 2021.

The Public Service (Civil Servants and Others) Pensions (Amendment) Regulations 2021 were made on 22 February 2021. These Regulations amend the Public Service (Civil Servants and Others) Pensions Regulations 2014 to make provision for the contributions payable by members of the Civil Service “Alpha” scheme for the period of 1 April 2021 to 31 March 2022. These Regulations come into force on 1 April 2021.

Budget resolutions and Finance (No.2) Bill 2019-21

On 9 March 2021, the Spring 2021 Budget (see our Alert) resolutions were passed, giving temporary legal effect to a number of measures announced in or before the Budget.

On 11 March 2021, the Finance (No. 2) Bill 2019-21 was published, legislating for the tax changes announced at the Budget. The Bill’s provisions relating to pensions include:

  • Clause 28, which freezes the standard LTA at its current level of £1,073,100 up to and including 2025/26. The change is effective from 6 April 2021
  • Clause 29 (and Schedule 5), which set out the tax treatment of collective money purchase arrangements (also known as collective defined contribution (or “CDC”) schemes) and benefits, a new type of pension provision introduced by the Pension Schemes Act 2021 (see our Alert). The provisions will have effect on a date to be set out in regulations.

Briefing paper on public sector exit payment cap

On 11 March 2021, the House of Commons Library published a briefing paper on public sector exit payments which looks at the introduction of the Restriction of Public Sector Exit Payment Regulations 2020 and their subsequent revocation by the Restriction of Public Sector Exit Payments (Revocation) Regulations 2021 (see 7 Days).

Major UK pension schemes adopt framework to reduce carbon emissions by 2050

On 10 March 2021, the Institutional Investors Group on Climate Change (“IIGCC”) published its Net Zero Investment Framework which aims to provide a “practical blueprint” for investors on how to tackle climate change and achieve net-zero carbon emissions by 2050, using a net zero investment strategy. Several UK pension schemes (managing an approximate $8.5 trillion in assets) have adopted the framework.

MoJ publishes response to judicial retirement age consultation

On 9 March 2021, the Ministry of Justice (“MoJ”) published its response to the consultation on the mandatory retirement age for judicial office holders which ran from 16 July to 16 October 2020. The consultation sought views on proposals to raise the mandatory retirement age (“MRA”) for judges, magistrates and coroners from 70 to 72 or 75.

The MoJ has decided to raise the MRA to 75 “to enable our courts and tribunals to retain for longer the expertise of experienced judicial office holders and to attract a greater number of talented and diverse applicants. Increasing the MRA gives judges, magistrates and coroners greater flexibility in both when they apply and when to retire.” The MoJ will seek approval for this change as soon as Parliamentary time allows.

OECD consultation on roadmap for DC pension design, and report on retirement savings outcomes for women

The Organisation for Economic Co-operation and Development (“OECD”) and its Working Party on Private Pensions have published for consultation a draft revised OECD Roadmap for the Good Design of Defined Contribution Retirement Savings Plans. The purpose of this Roadmap is to assist countries in designing occupational and personal DC pension plans which “build trust” and “improve robustness”. The consultation closes on 14 April 2021.

The OECD also published a report entitled “Towards Improved Retirement Savings Outcomes for Women”, which focuses on helping governments find solutions for retirement savings arrangements “that do not further exacerbate the inequalities driving the gender pension gap”.

PDP publish blog on building an onboarding strategy

On 12 March 2021, the Pensions Dashboards Programme (“PDP”) published a blog outlining the progress made in creating an “onboarding strategy”, and what pension providers should do next. In the blog, Head of Onboarding at the PDP, Paul Noone, recommends that if providers have not started to identify a strategy for connecting to the dashboard ecosystem, they should “work with their system team or provider and/or their pension administration team or supplier, to understand the options available and begin work on the best solution”. He added: “To assist with this, [PDP] will be issuing further details in due course on the technical architecture for the ecosystem. This will allow providers to better understand how to integrate with the dashboard ecosystem. [PDP] also recognise that providers will need further information to allow them to plan and prepare for what is required and [PDP] will release further information at regular intervals to assist with this planning.”

Pensions Minister calls for schemes’ scams support

On 11 March 2021, Minister for Pensions and Financial Inclusion, Guy Opperman, called on pension scheme trustees to support him in the fight against scams. In a letter to around 90 different schemes, Guy Opperman said schemes must begin sharing scam data with the Pension Scams Industry Group (“PSIG”) to help create a clearer picture of the scale of the issue. He said: “Pension schemes have a professional, ethical and moral duty to try and prevent their members [from] being ripped off, and better data-sharing is a vital first step.”

PLSA publishes Stewardship and Voting guidelines

On 12 March 2021, the PLSA published its annual Stewardship and Voting Guidelines, which provide practical guidance for schemes considering how to exercise their vote at AGMs. The guide warns pension fund investors to be watchful this AGM season as to how companies’ response to the COVID-19 pandemic has impacted their governance and workforce practices. With the COP26 summit due to be hosted in the UK in November, the guide has also been strengthened to reflect the TCFD reporting requirements (see our Alert).

Joe Dabrowski, Deputy Director of Policy at the PLSA said: “AGM season is an opportunity for pension scheme trustees and their asset managers to engage with company directors, to revisit environmental, social and governance policies and seize the chance to build back better than before.”

TPR publishes consultation on new criminal powers

On 11 March 2021, TPR published a draft policy and consultation on its proposed approach to investigating and prosecuting two new criminal offences being introduced under the Pension Schemes Act 2021: avoidance of a statutory employer debt, and conduct risking accrued DB benefits. See our Alert for further detail.

TPR’s Executive Director of Regulatory Policy, David Fairs, commented: “We appreciate the industry’s interest in our intended approach to investigating and prosecuting people under these new offences and the desire for clarity. The policy discusses in detail the points of similarity and differences with our existing anti-avoidance powers and provides examples of the types of behaviour that could fall within the scope of the new offences.”

The PLSA has also published a blog post looking at the implications of the offences.

The consultation closes on 22 April 2021. These offences are slated to come into force this autumn, with the final policy expected to be published later this year.

TPR publishes paper on corporate strategy

On 10 March 2021, TPR published its corporate strategy, described by TPR as “a blueprint for the future of pensions regulation [which] sets out its 15-year vision to protect savers”. It “reflects a fundamental shift in pension saving in the UK but also focuses on the short-term challenge of protecting millions of savers as the country recovers from the COVID pandemic”.

TPR commits to promptly delivering on the strategy’s five priorities, including stepping up the fight against scams, a new climate change strategy and a discussion paper to assess value for money for savers.

The final version of the strategy follows a series of industry round-table discussions last year, together with a discussion paper (see 7 Days). TPR’s response to that discussion paper was also published on the same day. A number of changes have been made as a result, including:

  • a firmer recognition of savers’ interest in investment decisions consistent with their values, ESG and climate change, which will drive a greater demand for stewardship
  • a greater emphasis on protecting and enhancing outcomes for all savers, in addition to clearer recognition of the impact of protected characteristics such as disability, gender, age and ethnicity have on saver outcomes
  • a commitment to move quickly on value for money, starting with work with the FCA to assess what represents value for savers
  • new graphics and forecasts on how the shift towards DC saving will evolve, while recognising that funds within DB will remain substantial over the lifetime of the strategy, and the impact and reliance on the state pension.

TPR has also published a blog post on the strategy.