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
- Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021
- DWP launch call for evidence on the social element of ESG investing
- Government publish response to public service pensions consultation on GMP indexation
- Government publish tax policies and consultations
- HMRC publishes issue 54 of Countdown Bulletin
- PASA launches Data Management Plan Guidance
- PLSA and ABI form new small pots working group
- PPF releases updated compensation cap factors
- PPI publish report on pension schemes investing into overseas assets
- TPR publishes approach to negotiating and concluding settlements of regulatory or civil enforcement action
- TPR urges pensions industry to report pension scams
- WPA provides recommendations for pension plan policies in light of COVID-19
- WPC publish report on protecting pension savers
Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021
The Corporate Insolvency and Governance Act 2020 (see our Alert) contains both permanent provisions about corporate insolvency, and temporary measures which were intended to provide businesses with protection as they were unable to trade at full capacity, or at all, as a result of national COVID-19 restrictions. As the situation is ongoing, the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 (which came into force on 26 March 2021) extend:
- the suspension of personal liability for wrongful trading until 30 June 2021. (The suspension is intended to protect directors of companies rendered insolvent by the pandemic from being held personally liable for debts incurred by the company during the insolvent period if they continue to use their best efforts to trade)
- temporary modifications relating to the use of certain types of contractual term and to winding-up petitions until 30th June 2021. (These restrictions are intended to help protect companies from aggressive creditor action while they continue to be financially impacted by coronavirus)
- modifications to the free-standing moratorium procedure until 30th September 2021. (These modifications relax the normal eligibility criteria to enter into a moratorium, in recognition of the extraordinary and temporary difficulties being caused by coronavirus, with the aim of making the moratorium as widely available as possible.)
On 24 March 2021, the DWP published a call for evidence seeking views on how pension scheme trustees understand social factors, and how they are included in their ESG policies. The call for evidence aims to help increase policymaker and industry understanding of what is currently being done, and what more could be done, to ensure both the risks and opportunities presented by social factors are adequately considered by pension schemes.
Responses to the call for evidence, which closes on 16 June 2021, will help inform the steps the Government needs to take to ensure trustees are better able to meet their legal ESG obligations. See our Alert for further details.
For further information on ESG, please see our recently published ESG 2021 guide.
On 23 March 2021, the Government published its response to the public service pensions consultation on GMP indexation. The consultation, which was launched in October 2020, sought views on the Government’s proposals for continuing to meet its past commitments to public sector employees “regarding the full indexation of public service pensions, including any GMP element” (see 7 Days).
The Government has decided to make full GMP indexation the permanent solution for public service pension schemes.
On 23 March 2021, the Government published its paper “Tax policies and consultations (Spring 2021),” outlining a number of measures that are designed to enhance the stability and effectiveness of the UK tax system. In this paper, the Government stated that it will be reviewing the appropriate taxation framework for DB pension superfunds and confirmed that work on the DB superfund tax framework will proceed alongside the development of the regulatory regime, which is already underway.
Additionally, the Government announced that it will be making “technical updates” to pension tax rules relating to the McCloud judgment (which held that the transitional provisions which were put in place as part of reforms to both the Judicial and Firefighters’ Pension Schemes constituted unlawful direct age discrimination), to rectify “anomalies” it has identified.
On 25 March 2021, HMRC published Countdown Bulletin 54 which provides important updates for pension scheme administrators about the ending of contracting-out. This bulletin focuses on issuing final data cuts to pension scheme administrators.
Kristy Cotton, Chair of the PASA Data Working Group, noted: “A Data Management Plan (“DMP”) is a critical scheme document and forms part of good scheme governance. Its implementation offers a means of documenting the data held by a pension scheme and a policy for managing it effectively… We would encourage all trustees to review the completeness, accuracy and appropriateness of their data and integrate a DMP as part of their wider risk management framework.”
The PLSA and ABI have formed a new industry co-ordination group, the Small Pots Co-ordination Group, to take forward the recommendations of the DWP chaired Small Pension Pots Working Group. The Small Pots Co-ordination Group comprises experts from a range of pension providers, industry bodies and stakeholders. Its formation was a recommendation of the Small Pension Pots Working Group report published in December (see 7 Days). The Group plans to examine existing data-matching requirements, common data standards and the requirements for a low-cost transfer process for mass consolidation. The Group intends to publish a progress report in the summer.
On 23 March 2021, the PPF published its annual update on changes to the compensation cap factors used to determine the level of compensation payable by the PPF to certain individuals from 1 April 2021.
In response to the UK annual average wage inflation having decreased over the year, the compensation cap remains unchanged for all age groups for 2021/22. For those at age 65, the cap remains at £41,461.07 per annum.
On 26 March 2021, the PPI published a report on how UK pension schemes approach investment into overseas assets. The report examines how trends in global asset investing by pension schemes has progressed over the years, and how it may evolve in the future.
TPR publishes approach to negotiating and concluding settlements of regulatory or civil enforcement action
On 25 March 2021, TPR published its settlement policy. It sets out TPR’s approach when negotiating and concluding settlements and what TPR expects from those who come to it with a proposal.
For the purposes of this policy, TPR defines settlement as the target of potential or ongoing enforcement action offering something in return for TPR agreeing not to pursue or continue the action. Examples of settlement might include an acceptable cash sum in a contribution notice case or an undertaking not to act as a trustee in a prohibition case. It may also include an outcome which is different from one that could be secured through legal proceedings. A settlement does not include situations where TPR decides not to pursue or continue with regulatory or civil proceedings.
TPR explains that its high-level aim for any settlement is to “offer a fair and appropriate outcome having regard to the circumstances of the case and its statutory objectives”. Factors which TPR will consider when deciding whether or not to settle include the:
- protection of member benefits
- possible duration and costs of regulatory action
- ongoing sustainability of the solution and
- long-term impact of the proposal.
Any proposed settlement outcome will be balanced against what TPR might achieve by pursuing or continuing enforcement action. TPR may choose to depart from the policy if it considers it appropriate to do so.
The World Pension Alliance (“WPA”) has published a paper on the challenges faced by pension funds and pension plan members throughout 2020 in relation to the COVID-19 pandemic, providing broad recommendations of policies to aid long-term retirement security. The paper highlights the damaging effects of specific policies such as pension withdrawals, summarises the challenges and global regulatory efforts in response to COVID-19 in different regions around the world and provides a brief analysis on sector developments since the beginning of the pandemic.
On 28 March 2021, the WPC published a report, “Protecting pension savers—five years on from the pension freedoms: Pension scams”.
The report calls on the Government to “act quickly and decisively” to protect pension savers and warns that commonly cited figures of the scale of pension scamming are likely to substantially underestimate the problem.
Stephen Timms, Chair of the WPC, said: “The pension freedoms brought more choice for savers on how to use their pension pots, but the reforms have also opened up a whole new world of opportunity for scammers and fraudsters… Tighter online regulation must be just the first step in improving protections for savers. Stronger enforcement with a new Pensions Scams Centre, a more effective FCA and extra support for victims are also desperately needed.”