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
- ABI announces Pensions Dashboard interim project
- European pensions stress test 2017
- FCA publishes results of its Assessing Suitability Review
- GMP equalisation – Lloyds update
- LGPS publishes transparency code
- PLSA publishes two “Made Simple” guides
- British Steel Pension Scheme settlement
- TPR publishes public service governance and administration survey
On 17 May 2017, the ABI announced that it would establish and lead an interim phase of the Pensions Dashboard project to maintain momentum with the development of the service during the period of the General Election.
The interim phase of the project has four stated aims:
- establishing a cost benefit analysis for the wider industry
- researching customer needs and establishing what features are likely to be most useful
- establishing the requirements and costs for a secure service between data providers and consumers
- further developing the technical data standards for all firms and working with PASA on agreeing a Code of Conduct in line with TPR’s requirements.
The Government’s objective is still for the service to be available to consumers by 2019.
On 18 May 2017, EIOPA launched its 2017 stress tests for European occupational pension schemes.
This is the second such exercise conducted by EIOPA, and, as with the first, covers both DB and DC schemes. The testing “takes into account the impact of the macro-financial developments” since the first stress test in 2015. The exercise is designed to assess the resilience of the European occupational pensions sector to adverse market scenarios. It will also analyse how occupational pensions can transfer shocks, from the impact of adverse scenarios, to the real economy and financial markets.
Participation in the stress test is voluntary. We understand that TPR will once again be assisting DB schemes wishing to take part by providing them with reporting templates that it has completed using data that it holds from scheme returns. Schemes will need to check the information contained in the form and fill in any missing details.
The deadline for participating schemes to complete the exercise is 13 July 2017. The aggregated results are expected to be published by the end of 2017.
On 18 May 2017, the FCA published a report setting out the findings from its review into the market for pensions and investment advice.
The suitability of advice was highlighted as one of the seven priorities in the FCA’s 2016/17 Business Plan. The FCA initiated the review in April 2016, with the aim of assessing “a statistically robust sample of advice files” to allow it to draw conclusions on the suitability of advice and quality of disclosure in the sector as a whole.
The review assessed 1,142 individual pieces of advice given by 656 firms against the suitability and disclosure rules in the FCA’s Conduct of Business sourcebook.
The FCA found that:
- in 93.1% of cases, the sector provided suitable advice. In 4.3% of cases, the advice was unsuitable, and in 2.5% of cases, it was unclear
- 52.9% of cases provided “acceptable” disclosure.
The FCA considers these positive results for the sector, and states that it believes that “they are a result of the successful adoption of the Retail Distribution Review by advisers and reinforced by our previous supervisory and enforcement activities”. However, firms are expected to consider the areas that the FCA flags as concerns, and make improvements where possible.
More detail on the FCA’s findings, including communicating examples of good and poor practice, will be released through 2017 and 2018.
Back in March 2017, the Government published the response to its consultation on several contracting-out issues, including GMP equalisation.
The response stated that the DWP intended to consider its position on GMP equalisation in the light of any developments in the legal action taken by Lloyds Trade Union as to whether the inequality of GMPs constitutes unlawful sex discrimination.
Lloyds Banking Group Pension Trustees Limited (the Trustee) has now started proceedings in the High Court in relation to GMP equalisation. The Trustee is seeking directions from the Court in relation to two broad questions:
- whether the Trustee is required to equalise its schemes for the effect of GMPs, and
- if so, how such equalisation should be achieved.
The case is not expected to be heard until 2018. We will report on any progress with the case in due course.
Following its announcement at the PLSA’s Local Authority conference, the Board of the LGPS launched its Code of Transparency on 18 May 2017.
Aiming to assist LGPS funds in obtaining the data they require in order to report costs on a transparent basis, the Board has developed a voluntary Code of Transparency for LGPS asset managers. The Code will be voluntary, with asset managers encouraged to sign up to it “to demonstrate their commitment to transparent reporting of costs”.
The core of the Code is a template for completion by asset managers, which has been developed in line with the Investment Association’s Disclosure Code.
The PLSA launched two new “Made Simple” guides at its Local Authority conference on 16 May 2017.
Good Quality Data for Local Authorities 2017 aims to provide people involved in running Local Authority pension funds with an insight into the drivers for good quality data, both the benefits of having it and the risks of not having it, and looks to define what ‘good’ really looks like for each scheme.
Factor Investing 2017 explains how factor investing, “a third way between passive, market index-following strategies and traditional active management”, can help pension funds improve the risk-return profile of their portfolios.
The press releases confirm that “good progress” is being made, and that “the key commercial terms of a regulated apportionment arrangement (RAA) have been agreed in principle between the company and the BSPS trustee”. However, work is ongoing to ensure that all TPR’s and the PPF’s conditions have been met before approval can be given to the arrangements.
Following the RAA, it is anticipated that a new pension scheme will be established. Members would then be given the opportunity to move to the new scheme prior to the existing scheme being assessed for entry to the PPF.
TPR has published the results of its Autumn 2016 survey into the governance and administration of public service pension schemes. This built on a previous survey in summer 2015, and “delved deeper into key risks and why some schemes are still struggling to improve”.
The survey supported TPR’s existing assessment that the top risks in this landscape are around scheme governance, record-keeping, internal controls and member communications.
The report also issues a warning to public service schemes: “scheme managers should be aware that we are more likely to move to use of our enforcement powers this year. We have, and will, take enforcement action where scheme managers have not taken sufficient action to address issues or meet their duties. Consistent with our compliance and enforcement policy, we will publish reports of our regulatory activities (including enforcement activity) to encourage higher standards.”