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

TPR’s Code of Practice 12 comes into force

The Pensions Act 2004 (Code of Practice) (Contribution Notices: Circumstances in Relation to the Material Detriment Test, the Employer Insolvency Test and the Employer Resources Test) Appointed Day Order 2021 has now brought Code of Practice 12 into force on 25 November 2021. The Code and code-related guidance have been updated to note the “in force” date.

The Code sets out the circumstances in which TPR may use its expanded CN powers, and is unchanged from the finalised version published in September 2021 (see 7 Days). It remains in the current format for TPR codes, as opposed to the new “single code” modular format.

State pensions and benefits increase confirmed

On 25 November 2021, the DWP confirmed that state pensions and benefits will increase by 3.1% next tax year, in line with CPI for the year to September 2021. The new rates will apply in the tax year 2022/23 and come into effect on 11 April 2022.

Revaluation Order 2021 published

When a person leaves a final salary pension scheme before normal pension age, with a preserved (or “deferred”) pension, that pension is likely to have lost value due to inflation by the time it is put into payment. Revaluation provisions, introduced for those who left schemes after 1 January 1986, are therefore designed to provide a measure of protection against inflation where there is at least one full year between the member leaving a scheme and reaching their normal pension age.

The annual Revaluation Order was laid before Parliament on 25 November 2021 and will come into force on 1 January 2022. It sets out the revaluation required (for that part of a pension in excess of GMP rights) for people who will reach their scheme’s NPA in 2022.

FCA announces proposals to improve outcomes for non-workplace pension customers

On 25 November 2021, the FCA announced proposals that firms offer a new “default” investment option to “help non-workplace pension customers save for their retirement”. The consultation paper proposes that this would need to be an “appropriately diversified basket of investments”, taking into account climate change and other ESG risks. Non-workplace pension providers will also need to alert customers holding high levels of cash, prompting them to consider investing in other assets with the potential for growth, with the aim of ensuring that pension savers have “as big a pension pot as possible” at retirement.

The consultation closes on 18 February 2022. Subject to responses, the FCA will look to publish a final policy statement and handbook rules in 2022.

Briefing paper on minimum pension age published

The House of Commons Library has published a briefing paper looking at the rules on NMPA, and examining the measures in the Finance (No 2) Bill (see 7 Days) to increase it from 55 to 57 from 2028.

PLSA publishes IRM “made simple” guide

The PLSA has published a guide to integrated risk management. The guide aims to bring “the theory of IRM to life and explains, with examples, how it can be used in the context of trustee decision making along the journey to an appropriate endgame.”

PPI publishes report on the impact of non-capped charging structures

The PPI has published a report entitled “What is the impact on member outcomes of different non-capped charging structures?”. The report sets out the proportion of pension scheme memberships which are subject to capped charges and examines the scale of uncapped charges in the market. The report differentiates between features available within capped and uncapped arrangements, analyses the at-retirement impact on members, and looks at how the market will change in response to charge cap development.

TPO publishes factsheet on unpaid workplace pension contributions

TPO has published a new factsheet entitled “Workplace pensions — unpaid pension contributions” in collaboration with MoneyHelper and TPR. The factsheet looks to provide customers with a clearer understanding of what to do if their employer is not paying contributions into their workplace pension scheme, and is designed to signpost customers to the organisations that are best placed to assist them if customers cannot resolve their concerns with their employer.

TPR publishes AE blog

On 24 November 2021, TPR published a blog on AE, titled “A pension revolution, but more work to do”. The blog notes that, despite the success of AE, “some warning signs remain”, including the fact that women and some ethnic minority groups are not saving as much as might be hoped. Amongst other things, it calls again on employers in the “gig economy” to comply with their obligations, and for all employers to ensure they meet their re-enrolment responsibilities.

WPC publishes correspondence with TPR and FCA on accessing pension savings

The WPC has published correspondence with TPR and the FCA in relation to a joint evidence session in September on accessing pensions.

In response to questions on how the “Stronger Nudge” (see our response to consultation) will be operated between the regulatory bodies, TPR and the FCA said that they plan to continue “close co-operation”. The FCA and DWP will be primarily responsible for establishing the effectiveness of the policy, and MoneyHelper will play an important role in monitoring take-up. Going forward all four organisations will share information and findings about the progress of the Stronger Nudge policy.

Government roundtable on pension funds investment

Prime Minister Boris Johnson and Chancellor Rishi Sunak have chaired a roundtable with representatives from UK-based pension funds, insurers and venture capital investors, discussing how to increase long-term investment in science and tech firms. This follows their joint letter earlier in the year which urged the sector to invest more in UK long-term assets. At the meeting, they highlighted the potential benefits that investments in science and tech could bring to UK pension savers, emphasising that the Government will continue to work closely with industry to ensure momentum.

At the roundtable, the Work and Pensions Secretary gave an update on the work the DWP is taking forward to support this, including consulting on further changes to the auto-enrolment charge cap for DC schemes.

Public sector consultations on McCloud remedy launched

The Cabinet Office has launched a consultation on the draft Public Service (Civil Servants and Others) Pensions (Amendment) Regulations 2022, which cover the remedy for the unlawful age discrimination identified in the McCloud judgment, and the 2022/23 member contribution rates.

The regulations make changes to scheme level legislation following the Public Service Pensions and Judicial Offices Bill. Additional scheme-level legislation will be published next year dealing with the remainder of the McCloud remedy work.

The Ministry of Defence has also launched a consultation on the amendments required to the Armed Forces Pension Scheme regulations to implement the McCloud remedy.