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

Coronavirus – Sackers response

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.

Corporate Insolvency and Governance Bill 2019-21

On 20 May 2020, the Government published the draft Corporate Insolvency and Governance Bill 2019-21.  The Bill is designed to “help UK companies and other similar entities by easing the burden on businesses and helping them avoid insolvency during this period of economic uncertainty”.  The Bill has three main sets of measures intended to:

  • introduce greater flexibility into the insolvency regime, allowing companies breathing space to explore options for rescue whilst supplies are protected
  • temporarily suspend parts of insolvency law to support directors in continuing to trade through the current emergency without the threat of personal liability, as well as to protect companies from aggressive creditor action
  • provide companies and other bodies with temporary easements on filing requirements and requirements relating to meetings, including AGMs.

These changes may affect the rights of pension scheme trustees where their scheme sponsor is in financial difficulties.

The Bill was given its first reading in the House of Commons on 20 May 2020 and is scheduled for its second reading on 3 June 2020.

New Coronavirus Job Retention Scheme Treasury Direction

The Chancellor made a new Treasury Direction on 20 May 2020, setting out the updated terms of the Coronavirus Job Retention Scheme.  The Treasury Direction makes various modifications to the initial Direction made on 15 April (see 7 Days), including changes to timing of eligibility for claims, eligibility criteria and calculation of the reference salary.  In relation to pensions, subject to certain conditions, the changes include clarification that furloughed employees can continue to act as trustees of a pension scheme without breaching the restriction on furloughed employees continuing to work.

Additional company guidance on reporting

On 20 May 2020, the FRC updated its guidance for companies on Corporate Governance and Reporting to include new sections on how companies should report exceptional items and alternative performance measures (“APMs”) in their reports and accounts, in the context of the Coronavirus crisis. The FRC notes that “investors expect to see balanced, transparent and clearly explained disclosures of material items arising from the crisis” and gives guidelines on how this should be achieved in relation to exceptional items and APMs.

FSCS announces final levy for 2020/21

The FSCS has announced its levy for 2020/21.  The FSCS will levy firms £649m this year, £14m more than was forecast in its Plan and Budget 2020/21 published in mid-January.  The main reason given for the change since the indicative levy is the inclusion of £44m to cover estimated compensation costs for London Capital and Finance, but other savings mean that the overall increase is £14m.

TPR guidance on closure of funds

On 21 May 2020, TPR updated its DC scheme management and investment: COVID-19 guidance for trustees to include a new section on when the temporary closure of investment funds creates a default arrangement.  The guidance confirms that, where trustees have redirected scheme contributions into alternative funds following a fund being temporarily closed (or “gated”), this could result in the alternative funds becoming default arrangements.  They would therefore be subject to legal requirements such as the charge cap and the requirement to have a statement of investment principles.  Schemes may need to take legal advice to assess whether this is the case.

TPR expects schemes that have discovered that they have unintentionally created a default arrangement to “immediately take steps to ensure this arrangement meets the legal requirements”.  TPR “will continue to take a pragmatic approach to decide whether it would be appropriate to take action in individual circumstances” but notes that, in the case of chair’s statements, it has “no discretion” and “will continue to impose fines for non-compliance”.

United Biscuits (Pension Trustees) Limited v HMRC (AG’s Opinion, 14 May 2020)

Advocate General Pikamäe has given his opinion in relation to a case regarding the VAT treatment of pension fund management services.

In 2017, the High Court had held that, as a matter of EU law, such services provided by non-insurers (companies not authorised to conduct insurance business) did not qualify for a particular VAT exemption. When the case was appealed, the Court of Appeal decided to refer certain questions of EU law to the CJEU for a preliminary ruling.

For further detail, see our case report.