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

Guaranteed Minimum Pensions Increase Order 2021

The Guaranteed Minimum Pensions Increase Order 2021 specifies 0.5 per cent as the amount by which the GMP element of an individual’s occupational pension entitlement must be increased for the tax year 2021/22. The Order was made on 1 March 2021 and will come into force on 6 April 2021.

Social Security (Contributions) (Amendment) Regulations 2021

The Social Security (Contributions) (Amendment) Regulations 2021 were made on 5 March 2021 and amend the Social Security (Contributions) Regulations 2001 to reflect new reporting requirements in respect of NICs. The changes will come into force on 6 April 2021.

Budget day 2021

On 3 March 2021, the Chancellor, Rishi Sunak, delivered the Spring budget 2021. The key pensions-related announcements were:

  • the Coronavirus Job Retention Scheme (“CJRS”) has been extended until the end of September 2021
  • the LTA will now be held at its current level of £1,073,100 up to and including 2025/26
  • the forthcoming Finance Bill will legislate to ensure that collective money purchase pension schemes (also referred to as collective defined contribution (“CDC”) schemes), which are to be introduced by the recent Pension Schemes Act 2021 (see our Alert), can operate as registered pension schemes for tax purposes (see 7 Days)
  • the Government is looking to encourage pension funds to direct more of their capital towards the country’s economic recovery, with the establishment of the UK’s first Long-Term Asset Fund in 2021
  • the Government is intending to consult “within the next month” on whether certain costs within the charge cap affect pension schemes’ ability to invest in a broader range of assets.

See our Alert for further detail.

DWP publishes response to consultation on general levy review

On 4 March 2021, the DWP published its response to the consultation proposing changes to the structure and rates of the General Levy from April 2021, 2022 and 2023. The response confirms that the levy rates will be increased, and four separate sets of rates will be introduced for DB schemes, DC schemes other than master trusts, master trusts and personal pension schemes. In addition, the Government intends to freeze the 2021/22 operating budgets of TPR and TPO at 2020/21 levels, and reduce by 25% the core element of MaPS funding for 2021/22 that will be chargeable to the levy.

Accordingly, the Occupational and Personal Pension Schemes (General Levy) (Amendment) Regulations 2021 were made on 1 March 2021 and come into force on 1 April 2021.

FCA announcement on end of LIBOR

On 5 March 2021, the FCA announced the dates that panel bank submissions for all LIBOR settings will cease. Thereafter representative LIBOR rates will no longer be available. All LIBOR settings will either cease to be provided by any administrator or no longer be representative:

  • immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and
  • immediately after 30 June 2023, in the case of the remaining US dollar settings.

This is an important step towards the end of LIBOR, and the Bank of England and FCA have urged market participants to take the necessary action to ensure they are ready.

FCA to amend guidance on redress for unsuitable DB transfers to reflect change in RPI calculation

The FCA has announced that it will amend its finalised guidance on how firms should calculate redress for unsuitable DB transfers in mid-March 2021, to ensure that consumers continue to receive appropriate redress following the reform of RPI from 2030.

The FCA has set out what firms should do while it is updating the guidance. Broadly, if, after considering the FCA’s statement, a firm believes that a calculation might have unduly disadvantaged a customer, the calculation should be revisited.

HMRC publishes Pension Schemes Newsletter 128

On 4 March 2021, HMRC published Pension Schemes Newsletter 128. This included an announcement that HMRC will extend several temporary process changes intended to help scheme administrators during the COVID-19 pandemic. The changes had previously been due to expire on 31 March 2021 but will be extended to 30 June 2021. This easement applies to a range of areas including the submission of Accounting for Tax returns, and the reporting of transfers to QROPS. The newsletter covers a number of other issues including:

IFoA publishes report on ESG reporting frameworks

The IFoA has published a guide which aims to provide clarity on the different ESG reporting frameworks currently available for businesses.

IFoA publishes report on impact of dividends and other covenant leakage on Pension Scheme Funding report

The IFoA has published a report on the impact of dividends and other covenant leakage on Pension Scheme Funding. The report highlights that UK dividends have fallen by 44% in 2020, reflecting the impact of the COVID-19 pandemic. The report aims to consolidate available information on the topic. It includes case studies and provides five example scenarios for consideration and discussion.

Jane Ralph, Chair of the IFoA Working Party, said: “In the event of a company failure, the actuary might find its professional judgement under scrutiny if there has been a perceived inequitable treatment between the pension scheme and other creditors. This includes consideration of dividend payments to shareholders where the pension scheme remains underfunded. It is therefore essential that actuaries are aware of their professional responsibilities and engage with the covenant advisor wherever feasible.”

LGPS: statutory guidance on using new employer exit payment powers

On 2 March 2021, the MHCLG published statutory guidance for LGPS administering authorities on preparing and maintaining policies concerning the use of the new powers granted to them in September 2020 to:

  • review employer contributions following certain significant changes,
  • spread exit payments over a period of time where the employer no longer has active members in the fund, and
  • enter into deferred debt arrangements with exiting employers.

This guidance is intended to assist administering authorities who wish to use these new powers and sets out high level principles and points which the Government believes should be considered by administering authorities. It will also be of interest to scheme employers. This guidance follows the publication of two partial Government responses to the 2019 consultation: the partial response to the reform of exit credits and the partial response to the review of employer contributions and flexibility on exit payments. More detailed guidance prepared by the Scheme Advisory Board to be read in conjunction with MHCLG’s statutory guidance has also been prepared.

Separately, the MHCLG has confirmed in a letter dated 4 March 2021, that its consultation on reforming local government exit pay, is “now considered closed” following the revocation of the Restriction of Public Sector Exit Payments Regulations 2020, by the Restriction of Public Sector Exit Payments (Revocation) Regulations 2021, which come into force on 19 March 2021. The MHCLG also indicated that there will be no further changes made to the local government pension or redundancy terms without a further, separate consultation.

PASA publishes dashboard guidance

On 2 March 2021, PASA published their dashboard guidance for UK pension schemes, trustees and providers on how to start getting ready for pensions dashboards. Chris Connelly, Chair of the PASA Dashboard Working Group, commented “The main message with this guidance is a very clear one. You should start preparing now”. PASA intends to shortly issue guidance on Data Management Plans “which all pension schemes should be looking to develop and implement to manage their data strategy.”

Pensions Minister sets out timetable for secondary legislation under Pension Schemes Act

In a written statement made on 2 March 2021, Minister for Pensions and Financial Inclusion, Guy Opperman set out a timetable for the secondary legislation made under the Pension Schemes Act 2021. In summary:

  • following the publication of the Government’s consultation on climate change risk reporting for pension schemes in January (see our Alert), regulations on this issue will be laid this Summer to come into force ahead of COP26 (a global united Nations summit about climate change and how countries are planning to tackle it) in November
  • on TPR’s new powers, the majority of draft regulations will be consulted on this Spring in order to commence these powers and the criminal offences measures in the Autumn
  • on the duty to give notices and statements to TPR in respect of certain events, the Government will consult on draft regulations later this year, for commencement as soon as practical thereafter
  • on scams, and CDC, the Government will consult on draft regulations in early Summer, with commencement on the scams measures from early Autumn 2021
  • on the Pensions dashboard, the Government will consult on proposed regulations later this year and lay draft regulations before parliament for debate in 2022. Delivery remains on track for 2023
  • on DB scheme funding, the Government will consult on draft regulations later this year, following promised engagement with key interested parties, working closely with colleagues at TPR as they develop the revised funding code, which will also be subject to a full public consultation.

Pensions Minister updates on state pension correction exercise

In a written statement made on 4 March 2021, Minister for Pensions and Financial Inclusion Guy Opperman has provided an update on uplifts to the state pension where there have been underpayments. He stated that between August 2020 and January 2021, the DWP analysed millions of state pension records, categorising cases that need further investigation. The DWP currently estimates the total costs of repaying the arrears is £2.7bn, plus an increased expenditure on corrected live cases of approximately £90m per year in the coming years.

TPR publishes regulatory report on DB pension scheme settlement

On 2 March 2021, TPR published a regulatory intervention report in relation to the Silentnight Group DB Scheme. The report sets out how TPR pursued the use of its anti-avoidance powers after the Silentnight Group’s DB pension scheme was severed from its sponsoring employers’ business by a pre-pack administration.