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
- Companies House publishes its business plan for 2018/19
- FCA sets out next steps to improve competition in the UK’s asset management industry
- FCA publishes its Business Plan for 2018/19
- PPI publishes Briefing Note on automatic enrolment
- TPAS launches freephone helpline number
- TPR publishes annual DB funding statement
- TPR launches spot checks on employers in the North East
- WPC publishes final report on pension freedom and choice
Once in force, provisions of the Small Business, Enterprise and Employment Act 2015 will prohibit the appointment of corporate directors. This ban was due to be implemented in October 2016, but we understand it was delayed by a heavy workload and other priorities in the relevant government department (BEIS).
On 5 April 2018, Companies House published its business plan for the period April 2018 to March 2019. In the plan, Companies House explains that it will work in partnership with BEIS to implement the ban on corporate directors.
A November 2014 consultation proposed an exception for pension scheme trustees. However, this has yet to be confirmed.
On 5 April 2018, the FCA published the latest step in its response to the concerns identified through its asset management market study (see our Alert). The proposed package of remedies is aimed at ensuring fund managers compete on the value they deliver and act in the interests of those who entrust them with their savings.
- final rules focused on the duties of fund managers as the agents of investors in their funds
- a consultation on proposed rules and guidance, focused on improving the information that investors get about funds, and remedies related to this. The consultation closes on 5 July 2018.
The final rules and guidance cover:
- a requirement for fund managers to make an annual assessment of value, as part of their duty to act in the best interests of the investors in their funds
- a requirement for fund managers to appoint a minimum of two independent directors to their boards
- the introduction of a new prescribed responsibility under the Senior Managers and Certification Regime to bring individual focus and accountability
- technical changes to (i) improve fairness around the way in which fund managers profit from investors buying and selling their funds, and (ii) facilitate the movement of investors into cheaper share classes.
The new rules will come into force on 1 April 2019 (profits) and 30 September 2019 (value assessment and independent directors).
The FCA also published:
- an Occasional Paper setting out the results of behavioural research which looks at how different ways of presenting information about charges affects investors’ decision-making and their understanding and awareness of charges
- an overview of asset management market study remedies.
The FCA notes that “other work continues which will benefit investors by improving cost transparency”. The FCA is supporting the independent Institutional Disclosure Working Group which is “on track to make recommendations” on a framework to support consistent disclosure of costs and charges to institutional investors.
On 9 April 2018, the FCA published its Business Plan for 2018/19. In relation to “pensions and retirement income”, its priorities include:
- developing a joint pensions strategy with TPR which will set out how they will work together to tackle the key regulatory risks facing the pensions sector in the next 5-10 years
- potentially extending the remit of IGCs for workplace pension schemes. (This wider work includes possible changes to the rules for IGCs to improve governance and value for money for consumers, following recommendations on social investing from the Law Commission.)
- helping consumers avoid scams.
On 5 April 2018, the PPI published Briefing Note 106 – Automatic enrolment minimum contribution increases and pay.
The Note aims to examine the extent of the effect of increased minimum automatic enrolment pension contributions on take-home pay and total remuneration, and how changes to income tax and NIC thresholds might reduce the impact of the contribution increases on salary.
On 9 April 2018, TPAS announced that it has a new number (0800 011 3797) which will allow customers to access its service completely free of charge.
The previous local rate number will remain in use to ensure customers can still access the service if they are unaware of the new number.
TPR published its annual DB funding statement on 5 April 2018. The statement sets out what TPR expects from trustees and employers, according to the ability of the employer to support the scheme and the scheme’s funding strategy. It is particularly relevant to schemes calculating valuations with effective dates between 22 September 2017 and 21 September 2018 (Tranche 13).
The statement includes guidance on how trustees should approach a valuation and the current issues that may affect them, such as market conditions and the impact of Brexit. It stresses the importance of risk-management and contingency planning given the “continuing economic uncertainty”. It also highlights examples of “leakage” of value from the companies which support DB schemes, and suggests close monitoring of member transfer requests in light of the potential impact on the scheme’s funding and investment strategy, and to ensure the right quality of advice is available to members.
In a related press release, TPR warns trustees and sponsoring employers of DB schemes that they “must do more to protect member benefits”. It says that it “remains concerned about the growing disparity between dividends and deficit-reduction payments and expects fair treatment between shareholders and trustees”, and warns that it will act if a scheme is not treated fairly, by using existing powers, while working with government to implement new powers proposed in the recent DB White Paper.
Anthony Raymond, TPR’s Interim Executive Director of Regulatory Policy, said “recent corporate failures have shown the risks of long recovery plans while payments to shareholders are excessive, relative to deficit-repair contributions. Trustees should negotiate robustly with the sponsoring employer to secure a fair deal for the pension scheme, while employers should balance the interests of pension savers with returns to shareholders and investors. We are working more closely than ever with trustees to support them in this process. However, if trustees fail to act we can intervene to protect members by using the full range of powers available to us now.”
TPR also confirmed that it has stepped up its proactive DB funding case work by 90% to support trustees as they prepare valuations and recovery plans.
As part of its nationwide campaign to ensure employers are meeting their automatic enrolment duties, TPR has begun carrying out spot checks across the North East of England. In the last month, inspection teams have visited more than a dozen businesses in towns and cities across the region to check that qualifying staff are being given the workplace pensions they are entitled to.
Employers are usually notified about an inspection a matter of days in advance of TPR’s visit. Those being visited include organisations that TPR suspects may not be compliant or who it believes are at risk of becoming non-compliant in the future.
The Work and Pensions Committee (“WPC”) published the final report of its inquiry into pension freedom and choice on 5 April 2018, calling for “a simple package of measures to create better informed, more engaged pension savers”.
Amongst its recommendations, the WPC proposes “a new, simple, standard drawdown pension”, with the introduction of “a new default decumulation pathway to support the disengaged – and protect their savings – including through NEST”, and a new system of transparent and accessible information. Amongst other things, the WPC argues for a single, publicly hosted, mandatory pension dashboard.