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
- Budget day 2020
- New pensions increases and revaluation legislation published
- Parental Bereavement Leave regulations published
- Consultation on climate-related risk
- HMT response to call for evidence on regulatory coordination
- PLSA guidance on diversity and inclusion
- TPR statement for trustees on coronavirus
- TPR updates guidance for cross-border schemes on a no-deal Brexit
On 11 March 2020, the Chancellor, Rishi Sunak, delivered his first Budget. Key points for the pensions world included changes to the tapered AA and a consultation published alongside the Budget on the possible reform of RPI. For more information, please see our Alert.
The tapered AA
The AA restricts the amount of tax relief an individual can receive on their pensions savings in any given tax year, with some higher earners having also been subject to a tapered AA since 2016. In a move designed to “support the delivery of public services” (primarily, the NHS), the Budget announced that the two main tapered AA thresholds will each rise by £90,000 from the tax year 2020/21. This means that:
- threshold income will be set at £200,000, so individuals with income at or below that level will no longer be affected by the tapered AA, and
- the tapered AA will only kick in for individuals whose adjusted income is above £240,000.
In addition, the upper boundary of the taper is set to be extended further, so that for those earning £312,000 and above the tapered AA will be just £4,000 going forwards.
HMRC has published a tax information and impact note, explaining the proposed changes and their impact.
The RPI consultation
The Government’s consultation on the future of RPI follows a recommendation by the UKSA that RPI should eventually stop being published but, in the interim, its “shortcomings…should be addressed by bringing the methods of” CPIH (CPI, including owner occupier’s housing costs) into it (see 7 days). The Government’s consent is required to make such changes before 2030.
The Consultation looks at whether to implement the proposal at a date other than 2030 and, if so, when between 2025 and 2030.
Other pensions-related announcements
The Budget confirmed that:
- the LTA will increase in line with CPI for 2020/21, rising to £1,073,100
- following a recommendation by the WPC last year (see 7 days), the Government will review an anomaly affecting lower paid workers whose pension schemes use a “net pay” arrangement. A call for evidence will be published “shortly”
- funding will be provided which ensures individuals can derive or inherit a State Pension from an opposite-sex civil partner (see 7 days) and
- the Government will legislate to ensure that collective DC (“CDC”) schemes can operate as registered pension schemes for tax purposes, once permitted under the Pension Schemes Bill (see our Alert).
The Government also announced a review of the VAT charged on fund management fees and published a consultation on tax treatment of asset holding companies in alternative fund structures.
The following pieces of legislation have been published:
- the Social Security Benefits Up-rating Regulations 2020 were made on 11 March 2020, giving full effect to the 2020 up-rating exercise as set out in the Social Security Benefits Up-rating Order 2020 (see 7 days)
- the Pensions Increase (Review) Order 2020 was made on 11 March 2020. It provides for increases in the rates of public service pensions, and
- the Public Service Pensions Revaluation Order 2020, setting out the revaluation required by schemes under the Public Service Pensions Act 2013.
The Parental Bereavement Leave Regulations 2020 and the Statutory Parental Bereavement Pay (General) Regulations 2020 were made on 9 March 2020, bringing in parental bereavement leave for employed parents who lose a child on or after 6 April 2020 (see 7 days). Additional regulations have also been published, including the Statutory Parental Bereavement Pay (Administration) Regulations 2020 and the Parental Bereavement Leave and Pay (Consequential Amendments to Subordinate Legislation) Regulations 2020, which give further detail on the implementation of the new leave and make consequential changes to other legislation.
On 12 March 2020, the DWP and Pensions Climate Risk Industry Group (“PCRIG”) published a consultation on new, non-statutory guidance for occupational pension schemes on assessing, managing and reporting climate-related risks. A quick start guide for trustees has also been published.
The guidance is in line with recommendations by the Taskforce on Climate-Related Financial Disclosures (“TCFD”) (see 7 days). Government has set the expectation that all listed companies and large asset owners, including occupational pension schemes, will disclose in line with TCFD by 2022. In addition, amendments made to the Pension Schemes Bill will, if passed, provide a power for the Government to require prescribed pension schemes to publish climate change related risk information and to impose requirements with a view to ensuring effective governance of those schemes with respect to the effects of climate change.
The consultation closes on 7 May 2020.
On 11 March 2020, HMT published a response to its call for evidence on regulatory coordination in the financial services sector (see 7 days). The call for evidence considered the issue of coordination between UK regulatory bodies with responsibility for financial services regulation, including the FCA and TPR.
The outcome of the call for evidence is that a Regulatory Initiatives Grid will be launched “over the Summer” and will provide “an indicative two-year forward look of major upcoming regulatory initiatives affecting the financial services sector”. The intention is to provide a “clearer picture of expected regulatory activity, which should mean that firms will be better informed about initiatives which may affect their business, improving their ability to plan ahead”.
The Grid will be managed by the “Financial Services Regulatory Initiatives Forum” with a membership comprising the Bank of England, PRA, FCA, PSR (Payment Systems Regulator), CMA, and HMT. Other bodies, such as the ICO and TPR will be invited to attend and contribute to the Grid “on an ad hoc basis, if and when responsible for a major initiative affecting the sector”.
On 13 March 2020, the PLSA published guidance on diversity and inclusion aimed at trustees of occupational pension schemes. The guidance “introduces some of the concepts and good practice associated with diversity and inclusion (“D&I”)”, including:
- what D&I means
- a summary of the benefits of D&I, and
- some practical steps for trustee boards to help promote greater inclusivity.
On 12 March 2020, TPR published a statement on COVID-19 (coronavirus) and what the trustees of pension schemes need to consider.
TPR expects trustees to “have appropriate monitoring and contingency planning in place” and to “understand their service providers’ business continuity arrangements”. It also expects trustees to “establish which scheme activities would be prioritised in the event of under-resourcing”, and refers to its guidance on Integrated Risk Management to help trustees “to consider how best to respond to emerging issues based on their particular circumstances” , in particular in relation to funding. The statement also says that TPR is currently engaging with “key administrators to understand their current preparedness”.
TPR has updated its guidance for cross-border schemes in the event of a no-deal Brexit. The guidance now includes a note on the transition period (which runs until 11pm on 31 December 2020). The guidance states that, for schemes that are authorised and approved to accept cross-border contributions, the transition period “means that things will largely remain the same” during that period.
At the end of the transition period, “schemes engaging in cross-border activities will need to be prepared for changes to take effect from 1 January 2021”, as set out in the guidance. TPR “will issue further guidance on steps that trustees of authorised and approved cross-border schemes should take to prepare their schemes for any changes that will apply to them post-transition”.