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
- New data protection legislation in force
- DWP publishes single departmental plan
- Committee publishes responses from pension funds on climate change risk
- OTS publishes paper on taxation of savings income
- TPR continues to roll out 21st Century Trusteeship campaign
- TPR publishes compliance and enforcement bulletin
As widely publicised, the GDPR is now in force. Aimed at creating a regulatory regime fit for the digital age, the GDPR builds on existing data protection provisions, many of which will feel familiar. However, there are a number of important changes that trustees and employers need to be aware of – see our Alert for details.
Just in time for the GDPR’s 25 May implementation date, the UK’s latest Data Protection Act received Royal Assent on 23 May 2018. The Data Protection Act 2018 (Commencement No 1 and Transitional and Saving Provisions) Regulations 2018 brought the parts of the Data Protection Act 2018 most relevant to pension schemes and trustees (including the easements referred to below) into force on 25 May 2018.
The new Act both brings the GDPR’s provisions directly into UK legislation (subject to certain amendments), and replicates and updates the Data Protection Act 1998 (which is generally repealed from 25 May 2018). Essentially, this means that the new Act and the GDPR need to be read side by side.
The Act brings with it some new easements that are designed to allow the processing of sensitive personal data in certain circumstances, including where the processing is “necessary for the purposes of performing or exercising obligations or rights” imposed by law “in connection with employment, social security or social protection”. This should help employers comply with their employment law obligations. A further easement is stated to apply to the processing of sensitive personal data by occupational pension schemes. However, it is narrowly drafted and likely to be of use only in limited circumstances, such as where medical underwriting is being undertaken.
The DWP has updated its single departmental plan. Amongst other key objectives, it lists “ensur[ing] financial security for current and future pensioners by: helping people to increase their pension savings; providing information on their private and state pension provision to enable effective planning for the future; and supporting older people to extend their working lives”.
It states that it aims to do so by:
- delivering “a State Pension system which aids retirement planning and protects low income pensioners”, including by continuing the “triple lock” uprating of State Pensions for the duration of the Parliament
- driving forward plans to strengthen the protection of DB pensions, including by delivering the Government’s manifesto commitment to strengthen the powers of TPR
- making it easier for people to access the help they need in making effective financial decisions, with the introduction of the new Single Financial Guidance Body
- looking to “increase participation and confidence in workplace pension schemes” by continued support for automatic enrolment, and by “tak[ing] forward wider work to explore ways of increasing retirement saving among the self-employed, and to engage with stakeholders on the proposals set out in December 2017 to extend coverage and increase contributions in the mid-2020s”
- responding to a recommendation within John Cridland’s review of State Pension age to conduct further research and gather evidence to establish the scope, likely level of user demand and added value for the introduction of a “mid–life MOT”, to encourage people to “take stock and make realistic decisions about extending their working lives and assess their finances to plan for a financially secure future”.
On 25 May 2018, the Environmental Audit Committee published the responses it received from the UK’s 25 largest pension funds on their approach to climate change risk and the extent to which it is incorporated into their investment decision-making. The questions were asked as part of the Committee’s inquiry into Green Finance.
The Committee has divided the funds into three broad categories based on their responses: “more engaged” (44% of the schemes in question), “engaged”, and “less engaged” (24%).
Mary Creagh MP, Chair of the Environmental Audit Committee, commented that “a minority of funds appear worryingly complacent. Pension funds should at least assess the exposure of their assets to the physical, transition and liability risks from climate change that will materialise during savers’ lifetimes.”
The Office of Tax Simplification (“OTS”) has published a paper exploring ways of simplifying the taxation of individuals’ savings income.
The report includes a “a comprehensive picture of the taxation of […] pension withdrawals”, and identifies nine areas where further work would be beneficial, including “improving guidance on the taxation of savings income, particularly on the treatment of pension lump sums, an area of particular confusion”.
TPR has released further guidance in its campaign to protect workplace pension savers by driving up the standards of governance across pension schemes.
The latest instalment looks at “Managing risk” within schemes.
TPR is not creating new or higher standards. Instead, the campaign, which is part of TPR’s commitment to support schemes by being clearer and more directive, will outline how people involved in running schemes can take action to meet expected standards and what action TPR will take if they do not improve. Earlier releases looked generally at good governance, trustees’ roles and responsibilities, “clear purpose and strategy”, “trustee training and improving your knowledge”, “skills and experience” (looking at the selection, review and evaluation of the trustee board), and advisers and service providers, considering their selection, appointment and review.
TPR’s latest compliance and enforcement quarterly report has been published. It reveals that, in relation to automatic enrolment duties, 35,862 enforcement powers were used between January and March 2018, up from 28,446 in the previous quarter.
In terms of general scheme duties, it reports that, for the first time, TPR:
- used its powers to obtain a court order requiring four scammers to pay back money they had taken from pension schemes
- fined a professional trustee for failing to maintain registrable information – where a professional trustee had been appointed to a scheme, but this had not been notified to TPR.
TPR used its powers in the first quarter of 2018 to enforce governance and administration rules against schemes 62 times. These include Mandatory Penalty Notices for failing to produce a chair’s statement, submitting a non-compliant chair’s statement and failure to complete a scheme return on time. It also used its information-gathering powers 45 times, and 105 trustees were appointed to schemes in the period by TPR.
The report also for the first time ‘showcases’ examples of interventions resulting in ”good outcome[s] for members without having to resort to major enforcement action”. The case study given cites the threat of TPR’s anti-avoidance powers securing “£3m and a full buyout guarantee” for the scheme in question.