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
- The Financial Guidance and Claims Act 2018 (Commencement No 5) Regulations 2018
- CMA publishes final report on investment consultancy market
- The FCA consults on patient capital
- Manage and Register Pension Schemes service newsletter
- Final PPF Levy Determination 2019/20 published
- Pensions Ombudsman reappointed
- TPR warns schemes to check if they are master trusts
The Financial Guidance and Claims Act 2018 (Commencement No. 5) Regulations 2018, SI 2018/1330, were made on 10 December 2018 and bring into force specified provisions of the Financial Guidance and Claims Act 2018 on 1 January 2019. The Financial Guidance and Claims Act 2018 received Royal Assent in May 2018 and contains provisions to establish the Single Financial Guidance Body, and to introduce a ban on pensions cold-calling (yet to come into force).
The new guidance body, which will take on the advisory functions of TPAS, MAS and Pension Wise to offer money and pension guidance across the UK, as well as debt advice in England, is due to launch in January 2019.
Among other things, these regulations:
- give the Single Financial Guidance Body its various guidance and advice functions, and (when providing information, guidance or advice in relation to pensions, debt or money) a duty to consider whether the recipient would benefit from also receiving information, guidance or advice in relation to its other functions
- extend the pensions guidance function of the Single Financial Guidance Body to flexible pension benefits, and
- make further minor and consequential amendments.
The report found that there is an adverse effect on competition in the investment consultancy and (to a greater degree) the fiduciary management markets from which “substantial customer detriment may be expected to result”.
The CMA has therefore proposed various remedies (several of which were suggested in its provisional decision published in July 2018) aimed at addressing the problems it has found “in an effective and proportionate way”. These include:
- the introduction of mandatory tendering when pension trustees first purchase fiduciary management services, and a requirement to run a competitive tender within five years if a mandate was awarded without one
- a requirement on investment consultants to separate marketing of their fiduciary management service from their investment advice, and to inform customers of their duty to tender in most cases before buying fiduciary management
- TPR giving greater support for trustees when running tenders
- requirements on fiduciary management firms to provide better and more comparable information on fees and performance for prospective customers, and on fees for existing customers
- a requirement for trustees to set objectives for their investment consultant, in order to assess the quality of investment advice they receive
- a requirement on investment consultancy and fiduciary management providers to report performance of any recommended asset management products or funds using basic minimum standards.
The CMA is also making recommendations to government to enable TPR to oversee the trustee remedies and to extend the FCA’s remit to include all of the main activities of investment consultants.
The remedies will be implemented by way of CMA order. Draft legislation setting out the new requirements will be issued for consultation in early 2019, with implementation of the requirements expected to begin later in the year. TPR is expected to issue guidance within six months of the order being made.
On 12 December 2018, the FCA published a consultation on proposed changes to its “permitted links” rules in its Conduct of Business (“COBS”) sourcebook. The aim is to address any unjustified barriers these may present to investment by retail investors in a broader range of long-term assets in unit-linked funds, while continuing to offer investor protection.
The consultation follows announcements as part of the Budget 2018, recommendations by the Law Commission in their 2017 report on Pension Funds and Social Investment, and engagement with HMT’s Pension Scheme Investment Taskforce.
At the same time, the FCA published a discussion paper exploring the impact of its regulatory regime on investment in “patient capital” (ie long-term investments with no expectation of a quick return) through authorised funds, to ensure appropriate access to patient capital investment while maintaining the right level of consumer protection.
Responses to the consultation and discussion paper should be submitted by 28 February 2019.
On 11 December 2018, HMRC’s Pension Schemes Services published its latest update on its new service to manage and register pension schemes.
The “Manage and Register Pension Schemes” service newsletter has articles on recent, newly-added, and forthcoming features of the service, and reporting for schemes already registered.
The total levy the PPF expects to collect is confirmed at £500 million, down from the £550 million estimate for 2018/19.
The levy rules remain largely unchanged from the proposals set out in September’s consultation, as the majority of respondents “supported the PPF’s view that the core methodology is working well”. Feedback on specific areas has, however, been reflected in the final rules. David Taylor, Executive Director and General Counsel, commented that the PPF had taken on board comments around its approach to commercial consolidators, and that its “thinking on this will continue to evolve as the regulatory framework becomes clearer, but feedback has helped us establish a workable, risk-reflective rule for the 2019/20 levy year.”
For further detail, please see our forthcoming Alert.
Anthony Arter has been reappointed as Pensions Ombudsman and PPF Ombudsman for two more years. Mr Arter, who took up the role in May 2015, will continue in post until 31 July 2021.
TPR has issued a warning to schemes to check whether they fall under master trust legislation.
Master trusts have until 31 March 2019 to apply for authorisation or to trigger their exit from the market. After that date, master trusts which fail either to apply or to trigger their exit will be breaking the law.
TPR has launched a step-by-step guide for schemes to check if they are a master trust.
Nicola Parish, Executive Director for Frontline Regulation at TPR, said: “It’s really important that scheme trustees use our guide and seek additional advice if they need to, or they could find themselves being forced to wind up in four months’ time… there is no appeal process, no opportunity to file an application – no other option than to wind up. We have been working with schemes we think meet the definition of a master trust, but trustees will always know their structure best, and it is their responsibility to check whether their scheme is a master trust.”
DC schemes providing pensions for multiple and unconnected employers may be a master trust, and trustees should seek legal advice if they think their scheme falls under the definition.