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 CMPS consultation response and regulations
- DWP launches second SPA review
- FCA publishes policy on enhancing climate-related disclosures
- FRC announces no change to SMPI assumptions
- GAD publishes LGPS recommendations
- PASA issues paper on “Statement Season” considerations
- PDP updates on dashboard progress
- PLSA publishes “Pensions Dashboards A-Z”
- PLSA “Made Simple” guides
- PPF levy rules for 2022/23 published
- PPF Hampshire decisions update
- PPI announces launch of UK Pensions Framework
- TPR delays second DB funding code consultation
- TPR publishes guidance on climate-related risks and opportunities
- TPR publishes updated scheme return questions
- WPC launches final part of inquiry into impact of pension freedoms
- WPC publishes response to pension stewardship and COP26 report
On 15 December 2021, the DWP published the response to its consultation on the draft Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations (“the Regulations”) (see our Alert), together with the final regulations. It also published the final draft of the Occupational Pension Schemes (Collective Money Purchase Schemes) (Modifications and Consequential and Miscellaneous Amendments) Regulations 2022 (“the Consequential Regulations”), which the DWP plans to lay in Parliament in February 2022. Subject to Parliamentary approval, both sets of regulations will come into force on 1 August 2022.
The regulations cover single and connected employer CMPS (or “CDC”) pension schemes, and “pave the way for the launch of the CDC scheme that Royal Mail and the Communication Workers Union aim to introduce”. The Government states that it will continue to engage with a “wide range of interested parties” on how CDCs can be extended further, including by the creation of multi-employer CDC schemes.
Existing DWP guidance will be updated to include publication requirements for CMPSs. This will be published at the same time as the final draft of the Consequential Regulations are laid in 2022, and will come into effect at the same time.
The PSA21 introduces the authorisation and supervision regime for CMPSs, and the regulations aim to help ensure that they are set up and well governed by providing clear criteria for TPR to authorise and supervise them. TPR expects to consult on its related draft code of practice in January 2022.
On 14 December 2021, the DWP announced that it has launched its latest review of SPA. The PA14 requires the Government to regularly review SPA, and this review must be published by 7 May 2023.
The review will consider whether the rules around pensionable age are appropriate, and specifically whether the increase to age 68 should be brought forward to 2037-39, based on latest life expectancy data and other evidence.
On 17 December 2021, the FCA published a policy statement on enhancing climate-related disclosures by asset managers, including FCA-regulated pension providers. With a view to providing greater transparency and consistency, they will be required to disclose how they take climate-related risks and opportunities into account in managing investments. The rules will come into effect from 1 January 2022.
The FRC has conducted a review of the assumptions in Actuarial Standard Technical Memorandum 1 (“AS TM1”), which sets out the basis on which annual SMPIs (DC schemes) should be determined.
The FRC concludes that no change will be made to the assumptions at present and that the current version will remain in force for SMPIs produced in the year beginning 6 April 2022. The FRC will consider the continued appropriateness of the AS TM1 assumptions and methods in anticipation of the commencement of pensions dashboards.
On 16 December 2021, GAD published its statutory review of the 2019 actuarial valuations of the LGPS in England and Wales. It outlined its findings and further recommendations ahead of the 2022 valuations, including assessing the impact of emerging issues including the judgment in McCloud.
On 17 December 2021, PASA released a supplementary paper on the proposed “statement season”. This follows a September paper which detailed initial administration considerations on the introduction of the proposals (see 7 Days).
The PASA Benefit Statement Working Group has engaged in discussions with industry bodies and considered comments made at the DWP’s Working Group meetings about the detail underpinning the introduction of a statement season. The supplementary paper highlights common themes from those discussions, identifies key issues “crucial to the success of the statement season project”, and makes positive suggestions intended to help address those issues. The key areas identified are:
- the statement season duration and proposed window (a three month period)
- paper vs digital statements, with a clear steer that the latter should be an option
- aligning the statement season requirements with the approach to the pensions dashboard
- implementation dates.
Helen Ball, Sackers partner and Chair of the PASA Benefit Statements Working Group, commented: “There are some crucial decisions around the placement of the statement season within the existing calendar year and the mode of delivery (paper versus digital) which could determine the overall success of the project… This paper provides constructive suggestions to help Government meet its objectives and increase saver engagement with, and levels of confidence in, pension savings.”
The PDP has announced the potential commercial providers taking part in the initial development of the pensions dashboards eco-system, in addition to the MaPS non-commercial dashboard.
On 16 December 2021, the PDP also published a blog looking at the last year of the dashboards’ progress. PDP Principal Chris Curry notes that it remains “committed to working with [the] industry to support its preparations and will supply all the information we have, as soon as it is available… By this time next year, we’ll have a pensions dashboards ecosystem in place, with the start of compulsory staging approaching. Get ready for dashboards – they’re on their way.”
On 16 December 2021, the PLSA published an industry guide “to the decisions required to make initial pensions dashboards a success”.
The Pensions Dashboards A-Z identifies 26 key issues relating to all the parties involved in the different layers of the dashboard ecosystem – from the DWP and the PDP, to administrators and schemes: “all will need to work closely and collaboratively together to resolve these issues”. It also sets out the seven “most urgent” issues, where it states resolution and decisions are needed as soon as possible, including testing and managing savers’ understanding, and GDPR compliance.
The PLSA has published two new “Made Simple” guides:
- the ESG guide sets out relevant terms, and explains ESG as a concept and how it can be integrated into the investment strategy and oversight of pension schemes. The PLSA also suggests a template ESG policy for schemes, providing a suggested checklist of steps to take to become “ESG-compliant”
- “Cost transparency made simple” aims to give “a good working knowledge of the various costs associated with managing a pension scheme”, so they can make “more informed decisions” on behalf of their membership.
The PPF’s consultation setting out its plans for the 2022/23 levy rules closed in November. It published its policy statement with final levy rules, and updated its levy estimate, on 16 December 2021. The policy statement confirms that:
- the majority of schemes paying a risk-based levy will see their levy fall
- the PPF will keep the measures in place that it introduced in 2021/22 to support schemes through the pandemic, ie the Small Scheme Adjustment, lower cap on the risk-based levy and the COVID-19 easement option (see our Alert)
- for the minority of schemes that do see increases and for 2022/23 only, it will introduce a limit of 25% on increases to individual schemes’ risk-based levy compared to 2021/22
- the PPF will update the rules covering commercial consolidators and schemes without a substantive sponsor (or “SWOSS”), and clarify through guidance the limited circumstances in which the rules would apply.
The PPF has also updated its levy estimate, including to reflect market movements and changes in insolvency risk scores up to October 2021. It concludes that it can update the estimate of the amount of levy it expects to collect in 2022/23 to £390m. This is a reduction of £130m from the previous levy year, and means the levy has reduced by over £200 million since 2020.
Following an earlier progress update, the PPF needed to finalise whether to put a six-year time limit on arrears payments due to PPF and FAS pensioners. The DWP and PPF Board have now finalised those decisions:
- there will be no time limit on payments relating to Hampshire or on uncapping arrears. The PPF will pay arrears from the time that affected members started to receive compensation
- although the FAS cap wasn’t affected by the Court of Appeal’s ruling, some members are entitled to Hampshire arrears to make sure that they receive 50% of the value of their accrued old age benefits. The PPF acts as the scheme manager for FAS on behalf of the DWP. The DWP has now confirmed that it will not put a time limit on the payment of Hampshire arrears for members, and that interest won’t be paid on the arrears because there is no legal basis to do so
- the PPF is “working hard to complete the payments due as a result of the court rulings”. It expects that it will take until the end of 2022 for the PPF to complete the majority of the payments.
The PPI has launched its “UK Pensions Framework”, designed “to support long-term analysis of how changes in the UK state and private pension system are impacting the experiences that people have in later life”. It includes five papers that provide insight into the development and content of the Framework.
TPR has announced that the second stage of its consultation on the revised DB scheme funding code, originally due before the end of 2021, will now be launched in “the late summer of 2022”.
The post notes that it is critical that the draft code and DWP’s draft regulations work together in a coherent and integrated way. TPR wants to take the opportunity to learn from the DWP’s consultation on the draft funding and investment regulations, which it expects to be published in Spring 2022, and wants to ensure that stakeholders have ample opportunity to engage with and input into TPR’s proposals as they are developing.
The existing code and funding regime remain in place until such time as the new legislative requirements and code come into effect. When introduced, the changes will be forward-looking, meaning that only those schemes with valuation effective dates on or after the code’s commencement date will be affected.
On 16 December 2021, TPR published the final version of its guidance to help trustees of certain schemes meet tougher standards of governance and reporting in relation to climate-related risks and opportunities (see our Alert), following consultation this summer. In a consultation response, published alongside the guidance, TPR tells trustees they must ensure the advice they get from external experts is “relevant and helpful”.
In addition, an updated version of its monetary penalty policy was published, to include an “Appendix 3: Breaches of the Climate Change Governance and Reporting Regulations”, alongside some minor tidying changes. Changes related to other aspects of the PSA21 are still awaited.
TPR states that it will contact trustees of schemes that may have moved into scope of the rules since the last valuation to ensure they are aware of their duties.
TPR has updated its scheme return pages for DB and hybrid schemes. It notes that there are some new questions on the returns this year, for which schemes can start to prepare, and includes links to example returns.
TPR states that it will send scheme return notices out from the end of January 2022. Schemes will have until 31 March 2022 to complete and submit it to TPR.
The WPC has launched the third and final part of its inquiry into the impact of the pension freedoms and protection of savers. Amongst other things, the inquiry will ask what advice and guidance people need when saving for retirement. The deadline for written evidence is 2 February 2022.
The WPC published its Fourth Report of Session 2021–22, Pension stewardship and COP26 in September 2021. The Government’s Response to the WPC’s recommendations has now been published.