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
- Consultation on charge cap review and cost disclosure
- Corporate Insolvency and Governance Act 2020 gains Royal Assent
- EU Taxonomy Regulation published
- FCA consultation and review on value for money
- FCA update on delayed activities and regulatory reporting
- FCA handbook update
- HMRC issues Pension Schemes Newsletter 121
- Updated Coronavirus Job Retention Scheme Treasury Direction
- PPI briefing note: Tax relief on DC pension contributions
- PLSA guide: GMP equalisation made simple
- TPR Corporate Plan 2020/21
- TPR blog on administration
- Univar UK Limited v Smith and others (High Court, 19 June 2020)
- Hughes v PPF (High Court, 22 June 2020)
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.
On 25 June 2020, the DWP published a call for evidence seeking views on the effectiveness of costs, charges and transparency measures in protecting pension member outcomes. This Call for Evidence, together with a forthcoming Pension Charges Survey, will inform the Government’s review of the default fund charge cap (a cap, currently set at 0.75%, on member-borne charges associated with scheme and investment administration, which applies to default funds of DC auto-enrolment schemes) (“the Cap”).
Potential proposals for revising the Cap include bringing transaction costs and certain life assurance add-ons into scope, lowering its level and restricting the use of flat fee structures for small pots. The DWP is also exploring policy options for increasing the use of the templates developed by the Cost Transparency Initiative (“CTI”) aimed at providing trustees with standardised cost and charges information from asset managers (see 7 Days).
The Call for Evidence runs until 20 August 2020. The DWP aims to bring forward proposals “later this year”. It also gives an update on its Investment Innovation and Future Consolidation consultation (see 7 Days), noting that a consultation response, together with proposals to address this issue, are promised “in the Autumn”.
For more detail, please see our Alert.
The Corporate Insolvency and Governance Act 2020 gained Royal Assent on 25 June 2020. The Act 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”, by introducing new flexibilities into the insolvency regime (see 7 Days), including the introduction of a new moratorium, intended to allow companies “breathing space” to explore options for rescue whilst supplies are protected.
The final version of the Act includes amendments which are intended to address certain of the concerns raised in relation to its impact on pension schemes. Broadly, the changes aim to ensure that, where appropriate:
- TPR and the PPF will be notified that a moratorium has come into force or been extended
- the PPF will have the same rights as the trustees (as creditors) to challenge decisions made by the monitor during a moratorium
- TPR and the PPF are provided with the same information as creditors in relation to a proposed restructuring plan.
The Secretary of State is also given a power, by regulations, to allow the PPF to exercise any rights that can be exercised by a scheme’s trustees as creditors in relation to a restructuring plan.
Companies House published guidance on 26 June on extensions to company filing requirements as a result of the Act.
The regulation on the establishment of a framework to facilitate sustainable investment (referred to as the Taxonomy Regulation) was published in the Official Journal of the EU on 22 June 2020, meaning that it will come into force 20 days later, on 12 July.
As the regulation’s disclosure requirements only apply after 31 December 2021 (the end of the Brexit implementation period), they will not form part of retained EU law in the UK. It is not yet confirmed to what extent the UK will align with the EU after the implementation period (see 7 Days).
On 24 June 2020, the FCA published a Consultation Paper on proposals that are “designed to promote value for money for the members of workplace personal pension schemes”. These proposals “aim to make it easier for Independent Governance Committees (“IGCs”) and Governance Advisory Arrangements (“GAAs”) to compare the value for money of pension products and services, enabling them to be more effective in assessing value for pension scheme members”.
The FCA also published the findings of its review examining how IGCs and GAAs – which act in the interests of members of workplace personal pension schemes – ensure those members receive value for money. It found that “a number of IGCs are working well to provide value for money for their members. However, a lack of consistency in the way IGCs and GAAs operate means that members of some workplace pension schemes may not be receiving value for money”. As a result of the review, the FCA has sent feedback letters to firms “to ensure they make improvements to the way they work with their IGC or GAA”.
On 24 June 2020, the FCA updated its list of activities and regulatory changes that have been delayed as a result of Coronavirus (see 7 Days). Delayed workstreams include its policy statement on pension transfer advice, contingent charging and other proposed changes (see 7 Days), and the directory of certified persons (see 7 Days) which are now expected in “H2 2020”.
The FCA provided a further update on 26 June 2020 to its previous announcement on extensions to submission deadlines for certain regulatory returns (see 7 Days). For returns not granted extensions in this latest update (which is a limited list), forms falling due after 30 June 2020 should continue to be submitted by their usual deadlines. Subject to any “significant change in the coronavirus pandemic (Covid-19) situation”, the FCA has “no intention of continuing to offer reporting deadline flexibility after 30 September”. Firms are reminded that the flexibility is intended to cover the situation where the impacts of coronavirus have made it impractical to submit the named returns on time. They should continue to submit all returns “as soon as they are reasonably able to”.
On 26 June 2020, the FCA published Handbook Notice 78, setting out updates to the FCA’s handbook. These updates include changes to implement a package of measures announced earlier this month, designed to address weaknesses in the DB transfer market, including a ban on contingent charging for advice on pension transfers and conversions except in specific circumstances, and enabling firms to give a short form of advice (see 7 Days).
On 25 June 2020, HMRC issued Pension Schemes Newsletter 121. The newsletter includes further updates on process changes as a result of Coronavirus, including that:
- recognising that it may be difficult for scheme administrators to obtain signatures on relief at source declarations and repayment claims, HMRC will accept them without a signature
- guidance has been updated to help scheme administrators facing challenges in submitting and making payments on time for accounting for tax (“AFT”) returns for quarters up to 30 September 2020
- HMRC has extended other temporary changes to some pension processes to help scheme administrators during the coronavirus pandemic, until the end of October 2020.
It also includes information on delays to the ability to submit AFT returns for the quarter up to 30 June 2020 on the managing pension schemes service (this will now be possible from 21 July 2020) and changes from April 2021 intended to simplify the process for reporting corrections to previous year payroll data by extending the use of the Real Time Information (“RTI”) Full Payment Submission (“FPS”).
HMT made a new Treasury Direction on 25 June 2020, setting out the updated terms of the Coronavirus Job Retention Scheme (“CJRS”). The Treasury Direction updates the original Direction made on 15 April and later updated on 20 May (see 7 Days), reflecting the extension of the CJRS to 31 October 2020, and the changes to the terms of the Scheme from 1 July onwards (see 7 Days). This includes changes to reflect that the CJRS will only provide a grant in respect of pension contributions until the end of July, and, where an employee works part time, that this will be in respect of the proportion of hours that the employee is furloughed.
On 23 June 2020, the PPI published a briefing note on tax relief on DC pension contributions. The briefing note considers the potential effect that changes to the current system of tax relief on DC pension contributions may have upon individuals, and the cost to the Exchequer. It also looks at the beneficial tax and NI treatment associated with DC workplace pensions.
The PLSA has published a guide on “GMP equalisation made simple”. The guide covers “the history, the methods and the roadmap for the future to help trustees prepare for and begin their GMP equalisation project”.
On 29 June 2020, TPR published its Corporate Plan for 2020/21 (delayed earlier this year; see 7 Days). The Plan sets out TPR’s priorities for the year ahead and “has been adjusted to reflect the realities of how the pensions landscape has changed because of the pandemic”. It “demonstrates TPR’s ongoing commitment to tightening its regulatory grip through its clear, quick, and tough approach and highlights the importance of working with key government and regulatory partners”.
The six priorities set out in the Plan are to:
- support workplace pensions schemes to deliver benefits through significant change driven by the global pandemic
- protect pension savers across all scheme types through proactive and targeted regulatory interventions
- provide clarity to, and promote, the high standards of trusteeship, governance and administration TPR expects
- intervene where appropriate so that DB schemes achieve their long-term funding strategy and deliver on pension promises
- ensure jobholders have an opportunity to save into a qualifying workplace pension through automatic enrolment
- continue to build a regulator capable of meeting the future challenges it faces.
TPR “will keep the plan and priorities under review as the impact of the pandemic develops and may publish revised intentions later in the year as necessary”.
TPR released a blog on 23 June 2020 focussed on the importance of pension scheme administration. It notes that “administration is an absolute core function in a pension scheme” and refers to its plans to “build stronger relationships with a number of strategically important administrators”, sharing best practice and aiming to drive up standards. It also encourages trustees and scheme managers, in light of the impact of Coronavirus, to “continue to be pragmatic and supportive to ensure administrators can keep delivering priority activities without ‘burning out’. Expectations about how quickly administrators may be able to return to discretionary work must be realistic and consider the impact of both a spike in workload and challenges in addressing it”.
The High Court has granted rectification in respect of the Univar Company Pension Scheme (1978) (“the Scheme”), where an update to the rules of the Scheme had (unintentionally, it was argued) hard-coded RPI.
For further detail, see our case report.
In Hughes vs PPF, the High Court has ruled on a challenge brought against it following the CJEU’s ruling in Hampshire v the PPF. The case concerned several matters in relation to PPF compensation, including the application of the compensation cap and the PPF’s proposed method for ensuring its compensation addresses the Guarantee.
For further detail, see our case report.