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
- CJRS and loan schemes extended by Chancellor
- DWP proposes increases to general levy
- DWP publish report on small pension pots
- EDPB publishes documents on end of Brexit transition period
- EIOPA publishes guide on Brexit pension implications
- EIOPA submits opinion on 2020 review of Solvency II to European Commission
- European Commission adopts Delegated Regulation
- FCA publishes list of pension scheme arrangements exempted from clearing obligation
- ICO publishes Code of Practice on responsible data sharing methods
- ICO statement on EU Binding Corporate Rules post-transition period
- LGPS guidance on exit cap waiver
- PDP publishes key dashboard data standards
- PLSA survey on diversity and inclusion
- PPF confirms levy measures following consultation
- PPF confirms Brexit won’t change its protection
- Ministry of Defence and Veterans UK publish Brexit transition guidance
At the time of writing, under this extended phase of the scheme, employees will continue to receive 80% of their current salary for hours not worked, up to a maximum of £2,500. Employers will however be asked to cover their NICs and employer pension contributions.
The Chancellor, Rishi Sunak, had previously stated that the employer contribution element of the CJRS would be reviewed in January 2021, but this has now been brought forward “to allow businesses to plan ahead for the remainder of the winter and the new year”.
HMRC’s suite of guidance has been updated to remove references to the January 2021 review and reflect that the CJRS has been extended to 30 April 2021.
The Chancellor further confirmed the Budget will be delivered on 3 March 2021 and will aim to present “the next phase of the plan to tackle the virus and protect jobs”. Businesses will also be given an extension up to late March 2021 to access a variety of loan schemes. The Government has stated that further support will be provided after March 2021 through a “successor loan scheme” and that it will publish further details in due course.
The General Levy on occupational and personal pension schemes recovers the funding provided by the DWP in respect of the core activities of TPR, the activities of TPO, and part of the activities of MAPS.
Earlier this year, the Government had taken steps to increase the levy rates by 10% from 1 April 2020 to begin to address a levy deficit that had accumulated, but ultimately decided not to go ahead with the changes due to the coronavirus pandemic (see 7 Days).
This consultation closes at midday on 27 January 2021.
On 17 December 2020, the DWP published a report by the cross-sector working group on small pension pots which launched in September 2020 (see 7 Days). The report makes recommendations on how to tackle the growth in the number of deferred members with small pension pots. The areas covered in the report are:
- the deferred small pots challenge
- member-led solutions – analysis and recommendations
- scheme-led solutions – analysis and recommendations
- micro-pots (pots worth only a few pounds, often accrued when automatic enrolment opt-outs are not returned in time)
- administrative processes to support large-scale transfer and consolidation solutions
- working group-suggested next steps, and outline roadmap.
The report recommends that further work between the DWP and pensions industry is undertaken during 2021 to assess the potential solutions, including models such as default consolidator schemes, and “pot follows member”.
The European Data Protection Board (“EDPB”) has issued a statement on the end of the Brexit transition period in which it describes the main implications for data controllers and processors. In particular, the EDPB underlines the issue of data transfers to a third country.
Additionally, the EDPB has published an information note on data transfers after 1 January 2021, which reiterates the need for EU-based exporters of personal data to the UK to comply with EU GDPR requirements for transfers made to a third country, and steers organisations to the ICO’s guidance on Data protection at the end of the transition period.
EIOPA has issued a one-page guide for consumers with a pension or life insurance policy from the UK, and who live in the EU or are considering moving from the UK to the EU. It covers the potential impact of Brexit on how such policies and pensions are serviced in the future, and draws attention to “three simple steps” to help consumers understand their position and how to protect themselves from possible scams.
On 17 December 2020, EIOPA submitted its opinion on the 2020 review of Solvency II to the European Commission. EIOPA is of the view that the Solvency II framework is “working well and no fundamental changes are needed at this point in time, but a number of amendments are required to ensure that the regulatory framework continues as a well-functioning risk-based regime”.
On 18 December 2020, the European Commission adopted a Delegated Regulation supplementing Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (“PEPP Regulation”), relating to requirements on information documents, on the costs and fees included in the cost cap, and on risk mitigation techniques.
The next step is for the Council of the EU and the European Parliament to consider the Delegated Regulation; if neither object, it will be published in the Official Journal of the EU and enter into force on the twentieth day following its publication.
The FCA has published a list of pension scheme arrangements (“PSAs”) in the UK and EEA that are temporarily exempted from the clearing obligation under the UK EMIR. It does not set out those PSAs that automatically qualify for the clearing exemption. The FCA also published an updated list of third-country markets considered as equivalent to a UK regulated market under UK EMIR.
ESMA has published a second report on the clearing solutions for PSAs under the EMIR (following its first report and public consultation in April 2020). The report reaffirms ESMA’s commitment to a broad implementation of the clearing obligation, including by PSAs, while recognising that more time is needed to make sufficient progress on the various solutions that would collectively enable PSAs to clear their derivative contracts.
On 17 December 2020, the ICO published its Data Sharing Code of Practice. The code, and a suite of new resources, provide practical advice to businesses and organisations on how to carry out responsible data sharing. Alongside the code, the ICO has launched a data sharing information hub where organisations can find targeted support and resources, which include case studies and data sharing FAQs and checklists.
The ICO has published Binding Corporate Rules at the end of the transition period, which provide guidance for organisations who currently rely on EU Binding Corporate Rules as an appropriate safeguard for international transfers from the EEA.
In addition, the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2020 were made on 17 December 2020, which enable binding corporate rules that pre-date the GDPR and which were authorised by a supervisory authority other than the ICO to continue to be relied on in specific circumstances (see 7 Days).
The Restriction of Public Sector Exit Payments Regulations 2020 impose a cap of £95,000 on the payments which specified public sector bodies, including local authorities, can make in relation to employee exits. On 16 December 2020, the MHCLG published a guide for local authorities covering the interim period between 4 November 2020 and the date on which the rules of the LGPS will be amended to reflect these regulations.
Among other things, the guide sets out the information which must be provided by administrating authorities when applying for a relaxation of the cap, in accordance with the HMT Direction which sets out circumstances when a relaxation can be granted.
The Local Government Association also issued a statement flagging concerns that administering authorities “are being asked to provide a figure they should not/cannot calculate – the strain cost should the waiver not be granted (the capped strain cost).” The statement therefore clarifies the strain cost information to be provided.
On 15 December 2020, the Pensions Dashboards Programme (“PDP”) published the key data standards which are intended to underpin the initial dashboard technology and allow individuals to view their pensions via their chosen dashboard.
Data standards “provide a common language to describe the pensions information that will be found and displayed on the dashboards”, for each individual’s different pensions. UK-based state and private pensions, including in the public sector, will be included in the first iteration of pensions dashboards. UK pension providers will be required to ensure that the data they hold is consistent with the data standards so that consumers can access this information.
The data standards guide contains detailed information on the data elements required for initial dashboards. It includes definitions of the overall process, the high level data elements and a technical breakdown of each data element, plus examples of how the data elements should work, using example data.
The publication of the data standards follows the release of the PDP’s second Progress Update Report in October 2020, which included an indicative timeline for the development of dashboards and estimated the point at which dashboards could be available to consumers is likely to be from 2023 onwards.
In a PLSA survey of pension schemes, 91% agreed diversity improves decision-making and attracts and retains talent while 89% agreed that it can improve the representation of members’ interests. However, there were mixed views as to the current diversity of pension trustee boards, with two-thirds of those surveyed finding it ‘average’ or ‘poor’. Age, gender and social background were seen to be better represented, while disability and ethnicity are perceived to be least well represented.
On 15 December 2020, the PPF published a note on the outcome of the 2021/22 levy consultation, confirming a number of key decisions ahead of the formal publication of the 2021/22 levy rules in January 2021. The PPF will:
- implement the small scheme adjustment, which halves levies for schemes with less than £20 million in liabilities and tapers levies for schemes with between £20 million and £50 million of liabilities
- implement the reduction in the risk-based levy cap to 0.25 per cent of liabilities from 0.5 per cent
- continue to measure insolvency risk on the basis in use since April using credit ratings and the PPF specific insolvency risk model operated by Dun & Bradstreet
The PPF has also confirmed the levy estimate of £520 million for 2021/22 and that the levy scaling factor of 0.48 will be retained. It also notes that the PPF will continue monitoring the impacts of COVID-19 on schemes and sponsors, and respond flexibly to issues that arise.
The PPF has confirmed that if a scheme employer is based in an EU country, and fails, it is still possible for that scheme to enter the PPF: “employers based in an EU country will simply be in the same position as non-EU overseas employers are at the moment.”
The Ministry of Defence and Veterans UK have published Brexit transition guidance for those who inherit War Pension Scheme, Armed Forces Compensation Scheme or Armed Forces Pension Scheme payments and who live in the EU. It notes that from January 2021, British bank accounts may not be used for payments from these schemes, as passporting arrangements between British and EEA banks end on 31 December 2020 (some banks have already started to close accounts in countries where they no longer intend to operate, regardless of whether the UK reaches a deal with the EU – see 7 Days).
Best wishes for the festive season and 2021
This is our last 7 Days of 2020. The first edition of the new year will be published on Monday 4 January 2020.
With best wishes for 2021 from all at Sackers.