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
- CMA launches review of audit sector
- FCA publishes discussion paper on the impact of climate change and green finance on financial services
- Government response to Treasury Select Committee household finances report published
- PPI publishes “The DC Future Book” fourth edition
- PPI publishes final report on the evolving retirement landscape
- TPR fines trustees for failing to invest savings promptly
- Mr S (PO-19400) – exercise of discretion in relation to death benefit
On 9 October 2018, the CMA launched a detailed study of the statutory audit sector to examine concerns that it is not working well for the economy or investors.
The move comes amid growing concerns about statutory audits. CMA Chairman Andrew Tyrie said, “if the many critics of the audit process are right, it is not just the companies which buy audits that lose out; it is the millions of people dependent on savings, pension funds and other investments in those companies whose audits may be defective”.
Among the questions in the market study, the CMA asks whether auditors and those that manage them should be accountable to a wider range of stakeholders including pension fund trustees, employees, and creditors (rather than the current focus on shareholders).
The closing date for written submissions is 30 October 2018.
In the same week, the FRC announced a strategic programme of work to ensure audit better serves the public interest. This programme encompasses work on auditor independence, audit quality, the future needs of investors and corporate viability.
FCA publishes discussion paper on the impact of climate change and green finance on financial services
On 15 October 2018, the FCA published a Discussion Paper on the impacts of climate change and green finance, setting out how they are relevant to the FCA’s statutory objectives of protecting consumers, protecting market integrity and promoting competition.
The Discussion Paper seeks input on areas in which the FCA considers a greater regulatory focus is warranted, including pensions, ensuring that those making investment decisions take account of risks including climate change.
The paper confirms the FCA’s intention to consult on rule changes requiring IGCs to report on their firm’s policies on evaluating ESG considerations, including climate change; how they take account of members’ ethical and other concerns; and stewardship.
The FCA will also consult on introducing related guidance for providers of workplace personal pension schemes, to clarify how they should consider financial factors (such as ESG and climate change risks and opportunities) and non-financial factors (such as responding to members’ ethical concerns) when making investment decisions. The FCA intends to consult on a single package of changes in the first quarter of 2019.
The FCA welcomed the PRA’s consultation published at the same time on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change.
The FCA and the PRA have been working together “to develop a joined-up approach to enhance the resilience of the UK financial system to climate change”. To co-ordinate action and share best practice, the PRA and the FCA are setting up a Climate Financial Risk Forum, designed to help the financial sector manage the financial risks from climate change and support innovation for financial products and services in Green Finance. The Forum will involve representatives from industry as well as technical experts and other stakeholders. The PRA and the FCA expect to finalise membership of the forum by the end of November, ahead of a first meeting in early 2019.
The FCA is seeking feedback on its Discussion Paper by 31 January 2019.
In its response, the Government addresses the Committee’s recommendation that pensions tax relief be reformed, stating that “while the government keeps all taxes under review, no consensus for either incremental or more radical reform of pensions tax relief has emerged” since 2015.
It also considers the Lifetime ISA, automatic enrolment rates and pension provision for the self-employed, the “Triple Lock” uprating of the State Pension, and individuals’ engagement with and understanding of the choices available to them as a result of pension freedoms.
The PPI published the fourth edition of its “Future Book”, its annual DC compendium commissioned by Columbia Threadneedle Investments.
The report sets out available data on the DC landscape, alongside commentary, analysis and projections of future trends. This year, there is a particular focus on “the way people draw down and spend their pension savings, and how this is evolving.”
The PPI has published the third and final report in its series on “The evolving retirement landscape”. The report looks at how the developing landscape will affect tax and benefits, exploring the impact that retirement income decisions (which have changed significantly since the introduction of pensions freedom and choice), may have on individual finances and tax revenues.
TPR has fined trustees of a master trust £5,000 (the statutory maximum for individual trustees) for failing to invest contributions promptly. This is the first time that TPR has issued a penalty for a breach of trustees’ duty to “promptly and accurately” process and invest contributions from employers under the Occupational Pension Schemes (Scheme Administration) Regulations 1996.
The trustees had reported the issue to TPR themselves, and worked with TPR to ensure that the affected members were returned to the financial position that they would have been in had the breach not occurred.
TPR’s “regulatory intervention report” notes that “while the time frame for processing scheme transactions is not explicitly defined in regulatory guidance, we expect member contributions to be invested without delay which, in this case, did not happen.”
TPO has upheld a complaint in a case where a scheme adopted an incorrect interpretation of its rules and, as a result, failed to exercise its discretion properly in relation to death benefits that had arisen.
For further detail, please see our case report.