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
- DWP publishes response to consultation on de minimis charges
- WPC hearing: call for evidence on trust-based pensions, and progress on CDC schemes
- FSCS confirms final levy for 2021/22 and forecast levy for 2022/23
- Home Office consults on amendments to the police and firefighter’s schemes amendments
- PASA briefing note on GMP reconciliation transition
- PASA publishes new Data Management Controls Guidance
Changes designed to protect small pension pots from being eroded by charges will be introduced next year. On 9 November 2021, the DWP outlined plans to introduce a “de minimis” threshold at which pensions providers will no longer be able to charge a flat fee to savers.
First consulted on May 2021 (see 7 Days), the Government has now published its response. The changes would mean that pension savings invested in the default funds of schemes used for AE with a value of £100 or less will be exempt from paying flat fees from April 2022.
The change will be introduced by the Occupational Pension Schemes (Charges and Governance) (Amendment) Regulations 2021, which will come into force on 6 April 2022, and amend the Occupational Pension Schemes (Charges and Governance) Regulations 2015.
Alongside the amending Regulations, the Government will publish a revised version of The charge cap: guidance for trustees and managers of occupational schemes. This revised guidance will describe how the de minimis will operate and set out examples.
The consultation also included a call for evidence on standardisation of permitted charges. The DWP is considering the evidence gathered on this proposal. Whilst Guy Opperman notes that this issue is of “great interest to the automatic enrolment sector” and that “clarity and comprehension around charges is important”, the DWP “will not rush into making decisions” and so will respond separately on this issue and set out next steps “shortly”.
In a WPC hearing on 8 November 2021, the Pensions Minister, Guy Opperman, confirmed that a call for evidence on the potential for trust-based schemes to have investment pathways and protections in place (similar to contract-based schemes) would be launched around spring 2022. Noting that the DWP and TPR have been working with the FCA on investment pathways, the call will ask what “members and schemes feel they want in this territory in a trust-based environment” more generally.
The Government also confirmed that Royal Mail will be able to apply from summer 2022 for its retirement savings plan to become the first new CDC arrangement, the legal framework for which was established under the PSA21 (see our Alert). The deadline for the application will depend on finalised regulations and TPR’s approved code of practice being published in spring 2022. Draft regulations are due imminently, to be finalised early next year, with guidance updated in spring. TPR will consult on its code in spring 2022, which is then likely to be laid in May 2022.
Regulations for “multi-employer CDCs” are also being developed, but given “capacity issues”, are unlikely to be ready before summer 2022.
On 11 November 2021, the FSCS published the November edition of its Outlook newsletter, with detail of its levy for 2021/22 and forecast levy for 2022/23. Key points include:
- the total levy for the 2021/22 financial year is £717 million, lower than the forecast £833 million. This is partially due to several SIPP operator failures that had been expected in this financial year, now likely to occur in 2022/23 or beyond. The FSCS does not expect to raise any more levies this financial year
- excluding SIPPs claims, the number of pensions compensation claims has increased by 26% year-on-year for the last four years
- the levy forecast for 2022/23 is £900 million. This will be consulted on by the FCA and PRA in January 2022. The assumptions on which the forecast is based include an increase in SIPP operator compensation payouts and an increasing number of complex claims relating to pensions.
The largest 1,000 regulatory fee payers will be invoiced for an advance 50% payment towards the annual levy in March 2022. All PRA and FCA regulated firms will be sent an annual levy invoice in summer 2022.
The Home Office has launched consultations on draft regulations amending the police pension schemes in England and Wales, and on draft regulations amending the firefighters’ pension schemes in England only.
The consultations seek responses on changes to the schemes required to enact the first phase of the remedy (as set out in the Public Service Pensions and Judicial Offices Bill (see 7 Days), closing the legacy pension schemes to future accrual from 31 March 2022 and ensuring members who remain in service from 1 April 2022 do so as members of the reformed scheme, to ensure future equal treatment going forward. The changes will come into force on 1 April 2022.
Further consultations on the implementation of the second phase of the remedy will follow in 2022. This will focus on members having a choice of benefits during the period for which the remedy for age discrimination applies (1 April 2015 to 31 March 2022).
In the meantime, the Fire Brigades Union has issued a letter before claim for judicial review against the Government, relating to the cost of the changes made to firefighters’ pensions following McCloud. The Treasury and Secretary of State have been asked to provide a response by 19 November 2021.
On 9 November 2021, the PASA GMP Working Group published a briefing note on how to treat GMP reconciliation data during transition to a new administration provider.
The PASA Code of Conduct on Administration Provider Transfers sets out guidance “to ensure the transition of administration between providers is managed in a professional manner, focusing on the best interests of members and trustees”. As administration providers are increasingly asked to undertake GMP reconciliation and rectification projects, the new briefing note addresses how these should be managed “to ensure accuracy, value and collaboration for all parties”.
Geraldine Brassett, Chair of the PASA GMP Working Group, commented: “it’s imperative the workings, decisions and documentation surrounding the project are safely passed across to a new administration provider. Records which need to be handed across include:
- an audit trail covering any changes to data
- information which allows calculations to be recreated in future if required
- a log of trustee decisions, or confirmation of where this information is recorded.
As the above is likely to involve Intellectual Property rights, discussions around this “should form part of drafting and agreeing the scheme’s Exit Agreement.”
On 11 November 2021, PASA published new Data Management & Controls Guidance, which builds on the Data Management Plans Guidance released in March 2021 and considers the ongoing data management and controls of pension scheme records.
Kristy Cotton, Chair of the PASA Data Working Group, said: “Trustees are facing ever-increasing demands for accurate data such as the dashboards’ requirements, regulatory reporting, de-risking activities, automated calculations, and self-service. As such, having confidence in an accurate and reliable dataset should be one of the key objectives for all trustees and their stakeholders. This guidance provides practical support for schemes and administrators in considering and developing their own data management controls.”