7 days

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

Consultation timing updates

The Chancellor of the Exchequer, Sajid Javid, confirmed (in a letter to the Economic Affairs Committee on 13 January 2020) that a consultation on whether to “address the shortcomings of RPI” between 2025 and 2030, will be delayed until Budget day (11 March 2020). The joint consultation between the Government and the UK Statistics Authority (“UKSA”) was scheduled to launch later this month. The consultation is intended to consider whether to bring the methods of CPIH (the Consumer Price Index including owner occupiers’ housing costs) into the RPI calculation and, if so, at what point. The letter states that consultation will run for six weeks, closing on 22 April 2020, and that “the Government and UKSA will respond to the consultation before the Parliamentary summer recess”.

TPR has also recently confirmed that it plans to publish its formal response to 2019’s consultation on the Future of Trusteeship and Governance in February 2020, and that the delayed first stage in the consultation process in relation to its revised DB funding code will be launched in March 2020.

HMRC newsletter on Managing Pension Schemes Service

On 14 January 2020, HMRC issued a newsletter with updates on its new service to manage and register pension schemes. The Managing Pension Schemes Service will replace the current Pension Schemes Online service.

The newsletter gives information about the programme for delivering “Phase 2” of the service (“Phase One” covered pension scheme administrator registration). This new phase is aimed at bringing:

  • pension scheme reporting and practitioner registration and
  • authorisation to a pension scheme

onto the service.

The newsletter also has articles on migrating schemes from the Pension Schemes Online service.

Countdown Bulletin 51 – January 2020

On 16 January 2020, HMRC published Countdown Bulletin 51. This builds on Countdown Bulletin 50, which gave information about the proposed solution for automatically allocating payments received from pension schemes in respect of GMP rectification for individual members, where the bill was part paid. The new Bulletin sets out additional information that may be required from scheme administrators and actions that must be taken by 13 March 2020.

New House of Commons Library briefing papers

The House of Commons Library has published two new briefing papers:

Dominic Chappell ordered to pay £9.5m into BHS pension schemes

TPR published a Determination Notice on 14 January 2020 outlining its decision to issue Contribution Notices for £9.5m against Dominic Chappell in respect of the two pension schemes connected to the collapsed high street chain BHS.

The notice outlines that TPR’s Determinations Panel will consider a broad range of factors in deciding whether there has been material detriment to a pension scheme, including those where the detriment cannot be easily quantified.

Fourteenth version of the Purple Book published

The PPF published the fourteenth edition of the Purple Book on 17 January 2020, which gives a comprehensive picture of the risks faced by DB pension schemes in the UK, reviewing 5,422 (99.7%) of the 5,436 private DB schemes eligible for the PPF. The data is based on information that eligible schemes are obliged to provide to TPR, and covers the period from 1 April 2018 to 31 March 2019.

The latest edition found that, while the aggregate funding ratio of schemes has improved, there are still a significant number of schemes that are underfunded. At 31 March 2019, 57% of schemes were in deficit on a PPF (s179) basis, which is lower than the average since March 2006 of 72%. The overall trend for de-risking has continued, with only 24% of scheme assets invested in equities, compared to 27% of scheme assets in 2018 and 61% in 2006. However, underfunded schemes tend to be invested more heavily in equities. Overfunded schemes have on average 69% of their assets in bonds, compared to just 25% for those schemes with a funding ratio below 50%.

The Purple Book also reveals:

  • the universe of DB schemes continues to shrink. There are now 5,436 eligible schemes, down from 5,524 in 2018 and 7,751 in 2006. The number of members in those schemes is now 10.1m, compared with 10.4m in 2018 and 14m in 2006
  • the funding ratio of all schemes has improved from 97% in 2006 to 99% in 2019 and
  • the deficit of schemes in deficit has improved to £160bn on a PPF (s179) basis, compared with £188bn in 2018.

Private members’ bill on PPF compensation and dividends

The Pensions (Amendment) Bill (a private members’ bill, introduced by Baroness Altmann on behalf of Lord Balfe) was introduced for its first reading in the House of Lords on 16 January 2020. The Bill had previously been put forward in October 2019, but made no progress owing to the dissolution of Parliament in November.

If passed, the Bill would amend the Pensions Act 2004 and the Companies Act 2006, with the aim of removing the cap on compensation payments under the PPF and requiring the approval of pension scheme trustees and TPR for the distribution of dividends.