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
- Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) Order 2021
- Briefing papers published
- HMRC issues pension schemes newsletter 127
- Government publishes response to consultation on NHS pension scheme flexibility
- Response to consultation on public services pension scheme transitional arrangements
- HMT confirms UK joins the International Platform on Sustainable Finance
- ICSWG publishes guide for assessing consultants’ climate competency
- PPF consults on changes to section 143 and section 179 actuarial assumptions
- TPR notes lack of climate change consideration in DC schemes
- TPR updates information on DB and mixed benefit scheme returns
On 27 January 2021, the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) Order 2021 was made. The Order specifies that (as the general level of earnings decreased in the review period) the levy ceiling for the financial year beginning on 1 April 2021 will remain the same as for the previous financial year, at £1,099,445,505. The standard amount of the PPF compensation cap will remain at £41,461.07, with the capped (90%) level therefore providing, at age 65, a maximum level of compensation of £37,314.96.
The levy ceiling is used to control the maximum amount of levy the PPF can charge eligible DB pension schemes in England, Scotland and Wales. This Order comes into force partly on 31 March 2021 and fully on 1 April 2021.
The House of Commons Library has published the following briefing papers:
- a briefing paper which looks at the impact of the COVID-19 pandemic on the employment rates and retirement plans of older people, and on their future retirement incomes
- a briefing paper on GMP increases which examines the arrangements for index-linking GMP rights for people reaching SPA before and after the new single-tier state pension was introduced on 6 April 2016, as well as the arrangements for members of public service pension schemes
- a briefing paper which examines the state pension triple lock mechanism, its effect so far and the arguments for and against the triple lock
- a briefing paper on state pension uprating which looks at the current policy on uprating the state pension and pension credit and the arrangements for uprating in April 2021.
On 3 February 2021, HMRC published Pension Schemes Newsletter 127. The newsletter covers a number of issues including:
- the Managing Pension Scheme service – an update on the practitioner registration and authorisation features
- relief at source – notification of residency status reports for 2021 to 2022
- recent regulations in relation to Gibraltar QROPS (see 7 Days)
- pension flexibility statistics for the period 1 October 2020 to 31 December 2020.
On 5 February 2021, the Department of Health and Social Care (“DHSC”) published its response to the consultation on NHS pension scheme flexibility. The consultation examined a new set of proposals offering senior clinicians more control over their pensions growth, so “they can continue to provide the services that patients need”. Following the consultation, the Government will no longer be proceeding with its proposals to increase the flexibility of senior NHS clinicians’ pensions because 2020 changes to increase certain taper thresholds (see 7 Days) had “achieve[d] the same policy aim as the proposed flexibilities but without the additional complexity that [they] would introduce”. The DHSC will continue to seek “improvements in the transparency of Scheme Pays”, and make “clearer information” available to members.
On 4 February 2021, HMT published a response to its July 2020 consultation on changes to public sector pensions for those affected by the unlawful age discrimination identified by the 2018 Court of Appeal judgment in the McCloud and Sargeant cases.
The Government will proceed with the second of its two proposed options — a “deferred choice underpin”. In brief, this approach will mean that eligible members retiring after implementation will get a choice of whether to take legacy or reformed scheme benefits for the relevant period when their pension benefits become payable. Those who continue in service from 1 April 2022 will do so as members of their respective reformed scheme. Legacy schemes will be closed in relation to service after 31 March 2022.
Alongside the consultation response, the Government published an updated Equality Impact Assessment providing analysis of potential impacts on those with protected characteristics as a result of the policies, together with a leaflet providing a high-level summary of the policies and who is affected by them.
The Government intends to introduce new primary legislation to remove the discriminatory features from the scheme rules with effect from 1 April 2022. Any necessary amendments required to scheme regulations in order to implement the policies will be subject to further consultation on a scheme-by-scheme basis.
On 3 February 2021, HMT confirmed the UK’s commitment “to strengthening international co-operation on environmentally sustainable finance” through becoming a signatory to the Joint Statement on the International Platform on Sustainable Finance (“IPSF”). The IPSF is a forum facilitating dialogue between policymakers focussing on investment initiatives that contribute to climate and environmental objectives worldwide.
The Investment Consultants Sustainability Working Group (“ICSWG”) has published a guide to assist trustees evaluate their investment consultants’ climate competency. It sets out five “competency themes” against which trustees “should expect their investment consultants to demonstrate their climate competency”, along with best practice examples for each theme.
The guide aims to be a practical response to the 2020 Pensions Climate Risk Industry Group (“PCRIG”) consultation, which recommended that trustees require their investment consultants and asset managers to demonstrate climate competence.
On 4 February 2021, the PPF launched a consultation on proposed changes to the actuarial assumptions under section 143 (“PPF assessment valuations”) and section 179 (“PPF levy valuations”) of the Pensions Act 2004 to bring these assumptions in line with current market pricing. Among other things, the PPF is proposing:
- to update its mortality assumptions
- to change the discount rates for pensioners and non-pensioners post retirement
- to amend the calculation for wind-up expenses and slightly reduce pensioner and non-pensioner benefit installation/payment expenses.
The consultation closes on 18 March 2021.
TPR has published the findings of its most recent annual survey of DC pension schemes, carried out across 200 single-employer and multi-employer group schemes and 16 master trusts between January and March 2020.
According to TPR, the number of DC schemes whose trustees are considering climate change in their investment strategies is “too low”, at 43%. Of the schemes whose trustees had not considered climate change in their investment strategies, 19% were planning to review this and 21% felt climate change was not relevant to their scheme.
In spring 2021, TPR is expected to publish a strategy setting out how it will help trustees meet challenges around climate change.
TPR has updated its information on DB and mixed benefit scheme returns. Scheme return notices will now be issued from the middle of February instead of the end of January (see 7 Days). TPR has also confirmed that the 2021 scheme return questions will remain the same as last year. Schemes will have until 31 March 2021 to complete and submit their returns.