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
- Coronavirus – Sackers response
- Pension Schemes Bill to progress “later this year”
- Religious same-sex marriage in Northern Ireland
- Trust Registration Service consultation outcome
- GMP Equalisation Working Group launches Data Guidance
- HMRC GMP equalisation tax guidance
- Consultation on public services pension scheme transitional arrangements
- ICO updates regulatory approach during Coronavirus
- TPO Corporate Plan 2020-23 and annual report and accounts 2019-20
- TPR annual report and accounts 2019-20
- Safeway v Newton (Court of Appeal – 13 July 2020)
- Schrems II (Data Protection Commissioner v Facebook Ireland Ltd) (European Court of Justice – 16 July 2020)
At Sackers we are committed to ensuring that the Coronavirus outbreak causes minimal disruption for our clients, and have taken several steps to ensure it is ‘business as usual’. For details of these steps, as well as key points for trustees and employers to consider in light of the outbreak (which we will continue to update), please see the dedicated section of our website, or talk to your usual Sackers contact.
The DWP provided an update on the Pension Schemes Bill on 15 July 2020, stating that the Bill has “cleared its first hurdle in the House of Lords” and will be taken through the House of Commons “later this year”. The announcement also highlights recent Government amendments to the Bill, including in relation to climate change (see 7 Days).
Regulations were laid before Parliament on 16 July 2020 which will allow same-sex couples to form a religious marriage in Northern Ireland. They will come into force on 1 September 2020. This follows earlier changes to permit civil same-sex marriage and opposite-sex civil partnerships in Northern Ireland in December 2019 (see 7 Days).
HMRC and HMT released the outcome to the technical consultation on the expansion of the Trust Registration Service (“TRS”), as required to transpose the Fifth Money Laundering Directive into national law (see 7 Days). The response confirms that registered pension schemes will continue not to have to register again with the TRS. Further details in relation to the exemptions will be covered in forthcoming guidance.
Proposed regulations putting this into effect have been published for consideration by Parliament.
On 14 July 2020, the cross-industry GMP Equalisation Working Group published guidance on the data required for GMP equalisation (“GMPE”). The guidance “looks at all the data aspects of a GMPE project and aims to help trustees understand the steps they can take now to get their scheme data ready for equalisation”.
To assist with the amount of information provided and its technical nature, the guidance provides a non-technical overview of the “key aspects of GMPE which relate to data”. It then discusses:
- “Calculation Solutions” (the technique chosen to determine a comparator’s current pension) for the purpose of obtaining opposite sex GMP in relation to pensioners and pensions in payment only
- potential GMPE data issues and related possible workarounds, including issues around member data, obtaining “true and opposite sex” post-1990 GMP, calculation and anti-franking
- a summary of the data which could potentially be needed for a GMPE project and the minimum data likely to be required for most exercises.
On 16 July 2020, HMRC published a newsletter setting out new guidance on tax issues with GMP equalisation. This supplements the guidance published in February 2020 (see our Alert) and covers payment of lump sums as a result of equalisation.
Previous lump sum payments
In relation to lump sum payments that have already been made, HMRC notes that “whether or not a lump sum payment is authorised depends on whether the payment conditions that applied at the time of the payment have been met”. In brief:
- where there was a requirement that a lump sum extinguished a person’s rights under a scheme to be authorised (for example serious ill health, trivial commutation, small and winding-up lump sums) this applies to “all the benefits or rights that could reasonably have been known about at the time of the payment”. Therefore “the lump sum will not stop being an authorised payment purely because, due to GMP equalisation, further entitlement is later identified that the scheme administrator could not reasonably have known about at the time”
- where the authorised payment requirements include a limit on the amount of the payment (for example small and winding-up lump sums) the limit “applies to the amount of lump sum actually paid. As long as the previous lump sum payment was not more than the relevant payment limit, that lump sum will not stop being an authorised payment purely because, due to GMP equalisation, further entitlement is later identified”
- however, because the limit for trivial commutation lump sums is based on the value for the member’s pension rights under all registered pension schemes on the “nominated date” instead of a limit on the amount of the lump sum payment, “it may be that as a result of equalising GMP rights the value of the member’s rights on the nominated date is found to be more than the relevant limit. If this is the case the original lump sum payment cannot be a trivial commutation lump sum” (and will be unauthorised unless it meets the conditions for another type of authorised payment).
Future lump sum payments
In relation to “top up” payments to previous lump sums, the payment conditions in force at the time the top-up payment is made (and not those at the date of the original payment) must be satisfied.
HMRC clarifies that certain lump sums can only be paid to a member, so cannot be authorised if they are paid after the member’s death.
The guidance then gives specific information on the requirements for lump sums, including those for lump sum death benefits.
The guidance does not cover GMP conversion, but includes an update stating that “more detailed work needs to be done on the wider issues associated with that methodology. Any schemes wishing to use the conversion method should consider any tax implications that may arise in accordance with the existing legislation and guidance within the PTM and seek advice as appropriate”.
On 16 July, HMT launched a consultation on changes to transitional arrangements in public service pension schemes, along with a leaflet summarising the proposals. This follows the Court of Appeal judgment in December 2018 on the McCloud and Sargeant cases, which found that transitional provisions put in place as part of reforms to both the Judicial and Firefighters’ Pension Schemes constituted unlawful direct age discrimination.
The consultation “sets out the government’s proposals for addressing this discrimination”. Under either of the options provided, the Government “would give eligible members a choice of which set of scheme benefits is better for them for the period 1 April 2015 to 31 March 2022”. The consultation also sets out proposals for moving all active members into reformed schemes after this period.
The consultation will close on 11 October 2020.
Separate, related consultations have also been published:
- a consultation addressing the issue specifically in judicial pension schemes
- a consultation on proposals that would extend LGPS statutory underpin protection to younger members of the scheme, “in line with a government commitment to remove the difference in treatment from all public service pension schemes with similar protections” to those in the McCloud and Sargeant cases.
On 14 July 2020, the ICO updated its regulatory approach during the Coronavirus pandemic. The updated document “maintains the same approach” as its initial statement (see 7 Days), with “small additions”, for example, reflecting the ICO’s ability to now be able to carry out audits remotely.
TPO published its Corporate Plan 2020-23 on 14 July 2020. The Plan outlines TPO’s strategic aims over the next three years and its updated key performance indicators for 2020/21. TPO’s “priority is to continue to make improvements to the customer journey, by resolving complaints at the earliest possible stage, making it easier and quicker for all parties”. Over 2020/21, TPO will focus on:
- customers – to ensure it deals with cases “in a timely and efficient manner and meets customers’ expectations”
- stakeholders – “to help them handle their own complaints without the need for TPO to be involved”
- staff and volunteers – “to continue to work towards making TPO a great place to work and volunteer”.
The Corporate Plan also outlines potential effects of the Coronavirus pandemic and new key performance indicators to cover quality and satisfaction from customers, stakeholders, staff and volunteers.
Next year will mark the start of a new three-year Corporate Plan and TPO “will be consulting with key stakeholders later in the year”.
TPO (with the PPF Ombudsman) also published its annual report and accounts on 16 July 2020, explaining the service’s activities and finances for the year 2019 to 2020. The report highlights an increase in inquiries, a decrease in the number of adjudication cases and an increase in early resolution investigations (which it attributes to the change in TPO’s approach to resolving cases at an earlier stage using its “early resolution” team). It also notes that, as a result of the Coronavirus pandemic, TPO is “prepared for a potential increase in the number of complaints received”.
On 16 July 2020, TPR published its 2019-20 Annual Report and Accounts, which TPR says “shows how TPR has driven up industry standards and safeguarded more schemes than ever”. The report highlights actions taken during the year, which included:
- completing the national roll-out of AE duties to employers, with 98% of eligible job holders now in a qualifying scheme
- authorisation of 38 master trusts
- direct contact with “more schemes than ever” through TPR’s supervisory approach
- initiating regulatory initiatives, “driving up standards in record-keeping, reducing recovery plan lengths and balancing deficit repair contributions and investment governance”.
The latest judgment has been released in a string of cases on equalising retirement ages retrospectively in the Safeway Pension Scheme.
The Court of Appeal held that the introduction of section 62 of the PA95 (which implied an equal treatment rule into all UK occupational pension schemes) with effect from 1 January 1996 closed the Barber window, meaning that retrospective changes to equalise benefits by “levelling down” were effective from that date.
For further detail, see our case report.
Schrems II (Data Protection Commissioner v Facebook Ireland Ltd) (European Court of Justice – 16 July 2020)
The CJEU has issued a decision on a challenge to the transfer of personal data to the US. The Court declared that the EU-US Privacy Shield does not provide appropriate safeguards for transfer of data outside the EEA because, in brief, US national security requirements were still given primacy.
It held that controller-to-processor standard contractual clauses (“SCCs”) can continue to be used. However, transferors must ensure that the data subjects are “afforded a level of protection equivalent to that guaranteed within the EU” by the GDPR.
For further detail, see our case report.