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
- APPT launches committee to address responsible investment and climate change
- Brexit: TPR updates cross-border schemes guidance
- CMA clarifies compliance report requirements
- FCA guidance on how to calculate redress for unsuitable DB pension transfers
- FCA guidance on advising on DB transfers and providing support with financial matters without FCA authorisation
- HMRC updates guidance on pension scheme rates and LTA
- HMT publishes guidance on indexation of public service pensions
- IFoA launches information gathering exercise on climate risk
- IOPS launches consultation on pension projections
- PPF confirms Fraud Compensation Fund levy for 2021/22
- PPF publishes 2021–2022 business plan outlining strategic priorities
- PSIG publishes revised code on pension scams
- TPO publishes factsheet on Early Resolution Service
- TPR publishes DC trust scheme return data 2020-2021
- Key April dates and issues for your diary
- Miscellaneous regulations
The APPT has launched a new committee to focus on responsible investment and climate change, following the recent DWP consultation, “Taking action on climate risk: improving governance and reporting by occupational pension schemes”. By requiring trustees of larger occupational pension schemes and authorised schemes to discuss climate change and ESG, the APPT believes that “they will act as a trigger for wider action”. The new committee intends to support the APPT’s membership with implementing the reporting framework.
On 31 March 2021, TPR updated its Brexit-related guidance for UK cross-border occupational pension schemes and UK employers that are contributing to occupational pension schemes established outside the UK. The main changes relate to the duties on a UK employer if they are using a non-UK occupational or personal pension scheme to comply with their statutory AE obligations.
The updated guidance encourages employers to check whether they are still able to use an EU/EEA scheme to satisfy their AE obligations, and to consider taking independent legal advice (where appropriate). Whether an employer can continue using an EU/EEA scheme for AE purposes after 1 January 2021 will depend on whether it is an “automatic enrolment scheme” or a “qualifying scheme”. An employer can meet its AE obligations by automatically enrolling relevant workers or employees into an automatic enrolment scheme, unless they are already active members of a qualifying scheme with the employer (whether or not a scheme is a qualifying scheme is assessed in relation to each member, so a scheme could be a qualifying scheme for some but not others).
In particular, it is no longer possible for an employer to use a non-UK scheme (including an EU/EEA scheme) as an automatic enrolment scheme to satisfy its AE duties. This means that if an employer was using an EU/EEA based scheme as an automatic enrolment scheme at the end of the Brexit transition period, immediate automatic re-enrolment will have been triggered on 1 January 2021. However, if an employer’s non-UK scheme was a qualifying scheme at the end of the Brexit transition period, the employer may be able to continue using the scheme.
The CMA has updated its guidance on the Investment Consultancy and Fiduciary Management Market Investigation Order 2019 to provide new information on submitting compliance reports. When submitting a compliance report under the Order, pension scheme trustees, investment consultancy and fiduciary management firms should note that they are responsible for their own compliance. As applicable, all must provide a compliance statement alongside a certificate certifying that the compliance statement has been prepared in accordance with the requirements of the Order, and that the entity has complied in all material respects with the requirements of the Order and reasonably expects to continue to do so.
The guidance notes that compliance reports are required by pension scheme trustees even if a fiduciary management provider has not been used (in this case the trustee is compliant because it doesn’t use fiduciary management).
As previously announced (see 7 Days), the FCA has updated its guidance for firms on how to calculate redress for unsuitable DB pension transfers to reflect changes to the way in which RPI inflation will be calculated from 2030. The updated guidance should be used for all redress calculations from 1 January 2021 onwards.
FCA guidance on advising on DB transfers and providing support with financial matters without FCA authorisation
On 30 March 2021, the FCA confirmed its finalised DB transfer guidance, following consultation on its draft guidance last year. Whilst there have been some amendments and additions, the final guidance largely reflects the draft consulted on. The FCA has said: “It remains our view that it is in the best interest of most consumers to stay in their DB pension. Where an individual seeks advice to transfer, we expect firms to give advice that is suitable and appropriate for their needs and situation. The finalised guidance will help firms to identify any weaknesses in their existing processes so that they can put into place an appropriate framework for managing and delivering suitable advice.”
The FCA and TPR have also published an updated guide for employers and trustees on providing support with financial matters without needing to be subject to FCA regulation. This guidance includes examples to illustrate what employers and trustees can and cannot do.
On 6 April 2021, HMRC published updated guidance on pension scheme rates and allowances for the 2021 to 2022 tax year, and on valuing a pension for LTA protection.
On 1 April 2021, HMT published guidance on the indexation of public service pensions, along with an updated direction on indexation of the GMP. The direction continues existing indexation provisions and, as a result of HMT’s consultation on GMP indexation in 2020 (see 7 Days), extends the arrangements to cover those members of public service pension schemes reaching SPA from 6 April 2021.
The IFoA has launched an information gathering exercise on climate risk calling for information, specifically on difficulties that actuaries are facing and examples of innovation and good practice. The IFoA notes that many actuaries and organisations are already very involved in managing climate related risks.
The International Organisation of Pension Supervisors (“IOPS”) has launched a consultation on its draft “Good practices for designing, presenting and supervising pension projections”. This document provides advice on how to design, present and supervise pension projections from funded arrangements. The consultation closes on 16 April 2021.
On 1 April 2021, the PPF confirmed it is raising a fraud compensation levy of 75p per member, or 30p for master trusts, in 2021/22. The PPF needs to raise the levy, the maximum allowed under current regulations, following a court ruling clarifying that occupational pension schemes set up as part of a scam were eligible to claim on the Fraud Compensation Fund (see 7 Days). The PPF confirms that it has already received a number of claims from such schemes, totalling over £40m, and that it expects to receive more.
On 31 March 2021, the PPF published its business plan for 2021–2022 which includes five strategic priorities, such as sustainable funding in volatile times and innovation. Key activities are also discussed, which include reviewing current funding strategy, implementing principles for dealing with vulnerable customers, monitoring key trends affecting levy methodology, and developing enhanced security pillars and innovative digital services to enable PPF to stay “agile, efficient and customer focused”.
On 1 April 2021, the Pensions Scams Industry Group (“PSIG”) published version 2.2 of its code of good practice on combating pension scams. PSIG Chair, Margaret Snowdon, said: “This version of the Code brings scams prevention and developments up-to-date. We also expect to produce a further update later in the year when regulations supporting the Pension Schemes Act 2021 [are published]. Alongside the new Code, we include a summary of changes since the last version in June 2019, so that readers can clearly see how the world of scams is evolving.”
TPO has published a factsheet about its Early Resolution Service (“ERS”), designed to explain what the ERS is, how it operates, and what the options are for applicants. In the factsheet, TPO notes that the “aim of the ERS is to provide an informal and streamlined approach to dispute resolution”. TPO has also published an updated version of its factsheet entitled “How we investigate complaints”.
On 30 March 2021, TPR published the latest edition of its annual statistics on DC trust scheme return data, aiming to provide a high-level snapshot of the current landscape of occupational DC trust-based pension provision in the UK, including information on the number, memberships and assets of schemes. The report segments the DC trusts into three categories: hybrid (schemes with two sections – one offering DC benefits and the other offering DB), micro (non-hybrid schemes with two to 11 members) and non-micro (non-hybrid with 12 or more members). The statistics show that memberships across all three categories have increased by 11% over the past year (compared to 17% the previous year) and by 812% since the beginning of 2010. In addition, 62% of all private sector workplace pension memberships, including active, deferred and pensioner, are in a micro scheme or a non-micro scheme.
Whilst we have been living through an unprecedented year, as usual the start of April heralds a number of changes for pensions. Please see our Alert for an overview.
The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 were made on 29 March 2021 and come into force on 30 April 2021. These regulations impose conditions on disposals of a company’s property in administration to connected persons (see 7 Days).
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Change of Expiry Date) Regulations 2021 were made on 31 March 2021 and came into force on 1 April 2021. These Regulations extend the power under the Corporate Insolvency and Governance Act 2020 to make temporary amendments to, or modify the effect of, corporate insolvency and governance legislation, to 29 April 2022 (see 7 Days).
The Judicial Pensions (Fee-Paid Judges) (Amendment) Regulations 2021 were made on 25 March 2021 and came into force on 1 April 2021. These Regulations add specified judicial offices to the list of those eligible for pension provision under the Fee-Paid Judicial Pension Scheme and, where relevant, clarify the date from which reckonable service is taken into account for the accrual of pension benefits under the scheme (see 7 Days).
The Financial Guidance and Claims Act 2018 (Commencement No. 7) (Dissolution of the Consumer Financial Education Body) Regulations 2021 were made on 29 March 2021 and came into force on 6 April 2021. These Regulations bring into force various amendments to FSMA, the Financial Services Act 2010 and the Financial Services Act 2012. The effect of these amendments is to dissolve the consumer financial education body whose functions have been transferred to the single financial guidance body MAPS.