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

Guaranteed Minimum Pensions Increase Order 2021

The draft Guaranteed Minimum Pensions Increase Order 2021 specifies 0.5 per cent as the amount by which the GMP element of an individual’s occupational pension entitlement must be increased for the tax year 2021/22. The Order, once made, will come into force on 6 April 2021.

Judicial Pensions (Fee-Paid Judges) (Amendment) Regulations 2021

The draft Judicial Pensions (Fee-Paid Judges) (Amendment) Regulations 2021 amend the Judicial Pensions (Fee-Paid Judges) Regulations 2017 with effect from 1 April 2021, in order to add specified judicial offices to the list of those eligible for pension provision under the Fee-Paid Judicial Pension Scheme and, where relevant, clarify the date from which reckonable service is taken into account for the accrual of pension benefits under the scheme.

Public Service Pensions Act 2013 (Judicial Offices) (Amendment etc.) Regulations 2021

The Ministry of Justice is currently consulting on how to address the unlawful age discrimination identified in the case of McCloud in respect of the 2015 reforms of the judicial pension scheme. However, in the interim, the Government needs to ensure that eligible judicial office holders have access to the Judicial Pension Scheme 2015 and has therefore made the Public Service Pensions Act 2013 (Judicial Offices) (Amendment etc.) Regulations 2021 to implement this. The Regulations come into force on 1 April 2021.

Review of AE thresholds for 2021/22, and DWP analysis

The AE thresholds for the 2021/22 tax year have been set out in the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021. The Order, once made, will come into force on 6 April 2021.

The Government has published analysis supporting the review of the AE earnings trigger and qualifying earnings band for 2021/22. Following its annual review for 2021/22:

  • the AE earnings trigger will remain at £10,000
  • the lower limit of the qualifying earnings band will remain at £6,240 and the upper limit will increase to £50,270 in order to maintain alignment with the NICs lower and upper earnings limits.

The decision to keep the AE earnings trigger at £10,000 reflects “the key balance that needs to be struck between affordability for employers and individuals and the policy objective of giving those, who are most able to save, the opportunity to accrue a meaningful level of savings for their retirement”. It also aims to give “stability at this point in light of the challenging economic circumstances” arising from COVID-19 and while the Government “continues to learn” from the phased increases in minimum AE contribution rates in 2018 and 2019. Retaining the link between NIC levels and the qualifying earnings band limits provides “an important element of consistency for employers, the pensions industry and payroll services”.

The Government still proposes to remove the lower earnings limit in the mid-2020s, subject to learning from the contribution increases in 2018 and 2019, “discussions with employers and others on the right implementation approach, and finding ways to make these changes affordable”.

Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2021

The draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2021 have been published. These Regulations give effect to the annual re-rating of various NICs rates, limits and thresholds for the purposes of calculating Class 1 – 4 NICs payments for the tax year beginning 6 April 2021.

GAD has published its Up-rating Report 2021 on the National Insurance Fund. The report aims to advise Parliament as they scrutinise the draft legislation on up-rating social security benefits and pensions, and updating NICs terms.

Pension Schemes Bill completes parliamentary stages and awaits Royal Assent

The Pension Schemes Bill returned to the House of Lords for consideration of Commons amendments on 19 January 2021. Following the debate, the Bill will now proceed to Royal Assent on a date to be scheduled. The House of Commons Library has updated its briefing paper on the Bill to take account of the Lords debate.

Please see our forthcoming Alert for further detail.

FCA publishes data on DB transfers market

On 18 January 2021, the FCA published its latest set of data on the DB transfers market (covering the period of October 2018 to March 2020), following its first set, published in June 2019, which covered the period of April 2015 to September 2018. From April 2021, all firms with the DB transfer permission must report this data on a six-monthly basis.

The latest data showed “signs of improvement” in respect of DB transfer advice and a significant reduction in insistent clients proceeding to transfer against advice. However, the data also found a reduction in the number of firms offering DB advice, which the FCA largely attributed to inadequate professional indemnity insurance.

Recently, the FCA launched its DB Advice Assessment Tool to assess the suitability of DB pension transfer advice.

FSCS management expenses levy and mission to increase awareness about pension protection

The FCA and PRA are consulting on proposals for the annual Management Expenses Levy Limit (“MELL”) for the FSCS for the financial year 2021/22. The MELL covers the FSCS’s ongoing operating costs, but does not include compensation costs, which are levied separately and decided by the FSCS.

The FSCS has also published an article about its mission to increase awareness about pension protection. It believes that only a minority of people are alert to the fact that the FSCS can compensate if a provider goes out of business. The FSCS wants to extend the use of its “FSCS protected” badge, which is intended to make it easier for customers to know who protects their pension.

House of Lords to debate Intergenerational Fairness report

The House of Lords will shortly debate a report by the former Intergenerational Fairness and Provision Committee. The report made a number of recommendations including that the triple lock for the State Pension be removed. Theresa May’s government responded to the report in July 2019 noting its disagreement with the Committee that the triple lock for the State Pension should be removed.

IAA publishes paper on global trends in pension fund ESG risk disclosure

The International Actuarial Association (“IAA”) has published a discussion paper entitled “Pension Fund Environmental, Social and Governance Risk Disclosures: Developing Global Practice”. The paper covers DB, DC and multi-employer pension funds, and is the result of an international survey into practice and regulation in different countries. It summarises global trends in pension fund ESG risk disclosures and highlights issues that actuaries involved with pension funds should be aware of.

The paper concludes that, apart from in the largest pension funds, “ESG risk disclosure is limited in many parts of the world, but increasing rapidly as legislation is implemented, particularly in Europe. Pension fund investments are coming under increasing scrutiny.”

IFoA publishes report on pension trustee decision making

The IFoA has published a report on the decision making processes of pension trustees, which aims to raise awareness of potential risks and provide practical steps trustees can take to improve their decision making in discharging their legal obligations, supporting good member outcomes.

The report notes that “despite extensive training, and displaying higher financial literacy than a lay person, trustees are not immune from decision biases, in particular when comparing member-nominated trustees with professional trustees.” The report makes a number of recommendations for enhancing trustee decision making.

MoU between FCA, DWP and MAPS published

A Memorandum of Understanding (“MoU”) between the FCA, the DWP and MAPS has been published. It aims to provide a framework for co-operation and coordination between these bodies by outlining their respective roles and responsibilities under the Financial Guidance and Claims Act 2018, FSMA and other relevant legislation. The MoU also includes standards that set out the principles and statutory obligations for MAPS, and arrangements for co-operation and the exchange of relevant information. The MoU will be reviewed annually and updated in the light of new issues and priorities.

The Government has also published the MAPS annual report and accounts setting out MAPS’ activities and finances for the year ending 31 March 2020.

WPC inquiry into pension scams

In a letter dated 14 January, HMT has answered the WPC’s questions on pension scams, including how HMRC works with other public bodies to signpost support for victims of scams and whether HMRC has the option not to pursue a tax bill for unauthorised access to a pension, or to delay doing so, when a scam is suspected.

On 27 January 2021, the WPC is due to question the Minister for Pensions and Financial Inclusion, Guy Opperman, as part of its inquiry, on how the Government and other public bodies are addressing scams and raising awareness about them.