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
- TPR guidance on communicating to members during COVID-19
- TPR 2020 Annual Funding Statement
- Progress on professional trustee accreditation
- FCA delayed activities and Handbook update
- FCA update on post-Brexit transitional powers
- HMRC issues pension schemes newsletter 119
- Updated guidance on Coronavirus Job Retention Scheme
- Guy Opperman statement on the response to COVID-19
- PLSA Top Tips for Workplace Pension Savers
- PLSA COVID-19 survey report
- PPF statement on COVID-19 impact on levy payers
- PPI briefing note: the pensions implications of COVID-19
- Carr v Thales Pension Trustees Ltd (High Court, 22 April 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 29 April 2020, TPR published guidance on communicating to members during COVID-19. It is designed to help members avoid making hasty decisions during these uncertain times. The key points to note are:
- the guidance is primarily aimed at trustees, but TPR also expects it to be followed by anyone involved in preparing member communications (eg pensions managers and scheme administrators)
- “for the foreseeable future”, TPR is asking trustees to send DB members who request a CETV quote a template letter which sets out points they should consider before making a decision, and where they should go for impartial guidance. The template was prepared jointly by TPR, the FCA and TPAS
- TPR recognises that trustees may tailor their approach for their situation and members.
For more detail, please see our Alert.
On 30 April 2020, TPR published its annual funding statement, primarily aimed at schemes with valuation dates between 22 September 2019 and 21 September 2020 (“Tranche 15”) and schemes undergoing “significant changes that require a review of their funding and risk strategies”.
Unsurprisingly, a key focus of the statement is the current pandemic. The statement stresses the need for trustees and employers to work together to manage the impact of COVID-19, balancing deficit recovery and equitable treatment of the scheme with the sustainable growth of the employer. However, TPR does not expect this to be at the expense of pension scheme security; schemes should also still be pursuing a long-term funding target, with suitable short-term modifications to reflect the current economic situation.
The approach to risk management largely follows that of previous years, with schemes asked to identify which of 10 broad categories they fall into (taking into account both COVID-19 and Brexit) to identify their key risks and actions.
TPR also provides an update on the timing of its revised DB funding code, with the deadline for responding to the first stage of a two-part consultation having been extended until 2 September 2020 (see 7 Days). This date will be kept under review. TPR confirms that the second stage of the consultation will now be published next year, and that it does not expect the new code to come into force “until late 2021 at the earliest”.
For more detail, please see our Alert.
On 27 April 2020, the Association of Professional Pension Trustees (“APPT”) announced that its accreditation process for professional pension trustees (see 7 Days) is “moving ahead despite the COVID-19 pandemic”, offering provisional accreditation until full accreditation can be assessed. This follows on from the PMI announcing the first fully accredited professional trustee under its accreditation process.
On 30 April 2020, the FCA released a new webpage setting out the delays to various workstreams as a result of Coronavirus. The FCA is reviewing its work plans “to delay or postpone activity that is not critical to protecting consumers and market integrity in the short-term”. The webpage sets out a number of delayed initiatives, including previously announced delays to its policy statement on pension transfer advice, contingent charging and other proposed changes (see 7 Days), and to the implementation of its retirement outcomes review remedies (see 7 Days). The FCA Handbook has also been updated to reflect these changes.
On 30 April 2020, the FCA updated its statement on use of its temporary transitional powers (“TTP”) after the end of the Brexit transition period (currently scheduled to end on 31 December 2020). The FCA intends “to apply the TTP on a broad basis and to the same areas previously communicated” and “to grant transitional relief from the end of the transition period until 31 March 2022”. This means that “regulatory obligations on firms will generally remain the same as they were before the end of the transition period for that temporary period” and that “generally, UK regulated firms will not need to complete preparations to implement changes in UK law arising from the end of the transition period by December 2020”.
There are specific areas where the FCA will not grant transitional relief. In these areas, the FCA expects firms and other regulated entities “to take reasonable steps to comply with the changes to their regulatory obligations by the end of the transition period”.
On 30 April 2020, HMRC published pension schemes newsletter 119. The newsletter includes further temporary changes to processes as a result of Coronavirus:
- in line with a statement made by the Economic Secretary (see 7 Days), confirmation that workers who are re-employed to help with the Coronavirus outbreak will not lose their protected pension ages
- an announcement that HMRC will not issue any notices to file pension schemes returns for 2019 to 2020, as administrators are experiencing difficulties in getting the valuations that they need to complete their returns
- guidance on valuing the sums and assets held within schemes, to test these against the LTA under benefit crystallisation event 1 (used when a member designates funds for a drawdown pension) where (a) stock exchange trading has been suspended as a result of Coronavirus or (b) the closing prices are not a proper measure of market value of the shares or securities as a result of Coronavirus
- guidance on other pension scheme valuations. HMRC expects that if assets held by registered pension schemes are being valued, normal methods should be applied “to get the most accurate valuation possible”. Where this is not possible, another method should be used to “arrive at a fair and reasonable valuation” and that alternative should be able to be demonstrated and supported.
The newsletter confirms that HMRC’s annual allowance calculator has been updated for changes to threshold income, adjusted income and the minimum tapered annual allowance for the 2020/21 tax year (see 7 Days). Amongst other items, it also confirms that the overseas transfer charge does not apply to transfers made to Gibraltar since the UK exited the EU (and as soon as the position after the transition period becomes clear, that HMRC will amend the PTM accordingly).
HMRC has made further updates to its guidance on the Coronavirus Job Retention Scheme (“CJRS”), including information on union and non-union representatives, company directors with an annual pay period and TUPE transfers.
On 27 April 2020, Guy Opperman, Parliamentary Under Secretary of State for Pensions & Financial Inclusion, made a written statement to the House of Commons on the steps the Government is taking “to support pension savers, trustees, employers and existing pensioners during the Coronavirus pandemic”. The statement covers:
- revocation of the planned general pensions levy increase (see 7 Days), stating that the Government “will now be focused on reviewing the structure of the levy and engaging with industry, at the appropriate time, on the best way forward on levy funding”
- the CJRS, summarising how the scheme works and noting that the Government is “continuing to work closely with the pensions industry to explain the detail of the CJRS scheme and to help providers take a pragmatic approach to disruptions to workplace pensions experienced by their clients”
- the impact on DB schemes, highlighting the easements to the regulatory regime set out by TPR (see our Alert) and stating that “with the existing flexibilities and easements there is no reason why a pension scheme should push an otherwise viable employer into insolvency”
- pension scams and pension scams and transfers, noting that the Government is “continuing to work closely” with TPR, the FCA, MAPS and pension providers “to identify any new trends or issues” and “take proportionate action if required”
- state pension, referring to a new service supporting people in accessing benefits from home and the increased state pension that came into payment on 6 April.
On 27 April 2020, the PLSA published a guide on “COVID-19: Top Tips for Workplace Pension Savers”.
The guide is designed to explain to members what happens to their workplace pensions under “a range of circumstances brought about by the virus” and provides “tips on what to do” about their pension. The guidance covers DB and DC schemes, members who are nearing retirement, members who have been furloughed, impact on state pension and the risk of scams.
On 30 April 2020, the PLSA released results of two surveys it conducted on the impact of COVID-19 on pension schemes. The results included the following statistics:
- 100% of pension schemes surveyed report they are confident (85% very confident, 15% fairly confident) that they can meet their payment obligations to members over the coming months
- 99% of schemes say their contingency plans are coping and almost two-thirds (62%) said COVID-19 is having little impact on the day to day running of the scheme (up from 39% in March)
- where schemes are experiencing issues or concerns, these relate to the pressures of remote working including difficulty serving member requests (33%), as well as a shortage of staff (22%).
On 28 April 2020, the PPF published a statement on the impact of COVID-19 on PPF levy payers. The statement is intended to “reassure” levy payers that the pandemic will have a “minimal impact” on the amount of levy the PPF expects to charge this autumn. The rules used to calculate the levy were fixed before the pandemic and, in calculating invoices, the PPF will be using information that was “largely collected before the economic impact of COVID-19 became significant”. The PPF confirms that, as in previous years, the highest levy they will ask an individual scheme to pay will be “0.5 per cent of its liabilities”. It also notes that the PPF is considering “all options” to find ways it can help schemes with the crisis, and will communicate any decisions “before invoicing starts”.
On 30 April 2020, the PPI published a briefing note on the impact that COVID-19 “may have on pensions now and in the future”. It explores “likely impacts” in terms of:
- stock market volatility and its effects on DC pot sizes and DB scheme sponsors’ ability to deliver on member promises
- employment and the CJRS
- the effects on different age groups.
The relevant increase rule included two limbs, which had become inconsistent with each other following the Government’s move to CPI for statutory increases in 2011. TPO had found that the rules of the pension scheme had hard-coded RPI pension increases, and the scheme’s trustee had been wrong to move to CPI. Agreeing with TPO, Nugee J found that RPI remained the “natural and ordinary reading”.
The latest in a line of cases on indexation provisions, the decision again demonstrates that everything rests on the specific wording of a set of rules. However, it is of interest in its consideration of construction issues.
For further detail, see our case report.