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 updates its single departmental plan
- Implementing MiFID II – multi-firm review of research unbundling reforms
- PPI issues the 2019 edition of its DC Future Book
- TPR updates guidance on DB investment
On 19 September 2019, the DWP updated its single departmental plan.
In order to “ensure financial security for current and future pensioners and make Britain the best place in the world to retire” the DWP intends, among other matters, to increase participation and confidence in workplace pension schemes by:
- taking forward trialling activities to explore ways of increasing retirement saving among the self-employed
- continuing to work towards implementing the core proposals of the 2017 review of automatic enrolment by the mid-2020s
- completing the implementation of the new authorisation regime for master trusts by the end of 2019
- driving forward plans to strengthen the protection of DB pensions, including the Government’s manifesto commitment to strengthen the powers of TPR, protecting private pension schemes by introducing punitive fines and a new criminal offence for those who wilfully risk or neglect member benefits, and strengthening the framework for clearance of corporate transactions
- making it easier for people to access free and impartial help to make effective financial decisions through MAPS, which will also convene and oversee a delivery group to lead the industry’s development of pensions dashboards.
The FCA’s rules to implement MiFID II require asset managers to explicitly pay for third-party research, and brokers to price and provide research separately. On 19 September 2019, the FCA published the findings of its review on how firms have implemented these rules since their introduction in January 2018.
Overall, the FCA found:
- the way most buy-side firms have implemented the new rules has improved accountability and scrutiny over both research and execution costs. Most firms have chosen to absorb research costs themselves. This resulted in around £70 million of savings for investors in UK-managed equity portfolios across its sample in the first half of 2018 compared with 2017
- most buy-side firms can still access the research they need. The FCA found no evidence of a material reduction in research coverage, including for listed small and medium enterprises
- asset managers’ research valuation models have different levels of sophistication, particularly in evaluating the quality of research. The FCA expects firms to refine models to ensure they are acting in the best interests of their clients
- there are a wide range of sell-side research pricing levels, which the FCA attributes to an ongoing process of price discovery. The FCA will monitor for potential competition concerns in this market and will take action if it considers it necessary
- in some cases, firms have been uncertain in how the new rules apply, such as when attending trade association events, marketing research services or making contributions to consensus forecasts. The FCA has clarified its expectations in these areas.
As firms are continuing to develop their arrangements and a market for separately priced research is still emerging, the FCA intends to undertake further work in this area in the next 12 to 24 months.
On 19 September 2019, the PPI published the fifth edition of its annual DC compendium, the DC Future Book. This report sets out available data on the DC landscape alongside commentary, analysis and projections of future trends. This year’s chapter four explores how changes in governance and investment strategy could increase the size of member pots at retirement.
TPR has revised its guidance on DB investment to include updated information on investment decisions, SIPs, stewardship, reporting, sustainability and financial and non-financial factors.