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

• DWP consults on changes to PPF compensation regulations
• ESMA issues clarification on clearing obligation for pension scheme arrangements
• FCA responds to IDWG cost disclosure recommendations
• FCA policy statement on final 2018/19 fees and levies
• FCA consults on introduction of a financial services directory
• PLSA publishes final recommendations on improving retirement incomes
• TPR master trust code of practice laid before Parliament

DWP consults on changes to PPF compensation regulations

On 3 July 2018, the DWP launched a consultation seeking views on the draft Pension Protection Fund (Compensation) (Amendment) (No.2) Regulations 2018.

The DWP states that “an important principle of the PPF is that compensation should be based on the member’s total pension benefits within a scheme, and that this should be subject to an overall compensation cap where appropriate.” In the October 2017, the High Court held in Beaton v the Board of the PPF, that benefits not attributable to pensionable service in the scheme in question (in this case, benefits which were transferred in on the basis of a fixed pension) cannot be aggregated with other relevant pension benefits derived from pensionable service in the scheme for the purposes of applying the PPF compensation cap – the cap should apply separately to each tranche of benefit. According to the DWP, this has “resulted in the legislation being interpreted in a way that does not reflect PPF practice or the policy intent in cases where a person has benefits derived from a fixed pension”.

The consultation therefore proposes changes to PPF compensation rules which aim “to remedy the immediate problems caused by the judgment and ensure that the PPF have the legal basis to administer the compensation regime as intended”. In particular, the draft regulations seek to clarify that a relevant fixed pension is regarded as attributable pensionable service for the purpose of calculating PPF compensation, including the application of the PPF compensation cap where relevant.

The consultation closes on 24 July 2018.

ESMA issues clarification on clearing obligation for pension scheme arrangements

The European Securities and Markets Authority (“ESMA”) has issued a statement on the clearing obligation for pension scheme arrangements (“PSAs”). EMIR introduced a temporary exemption from clearing obligations for PSAs, which is due to expire by 17 August 2018.

While there is no option of further extending this temporary exemption under EMIR, there are proposals to extend it further as part of the “EMIR Refit” review, which is expected to be finalised this year. In the meantime, ESMA indicates it expects national competent authorities to “not prioritise their supervisory actions towards entities that are expected to be exempted again in a relatively short period of time, and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in a proportionate manner”.

FCA responds to IDWG cost disclosure recommendations

The Institutional Disclosure Working Group (“IDWG”) launched as part of the FCA’s Asset Management Market Study remedies package, has published a summary of its final report and made a number of recommendations. Established to support “consistent and standardised disclosure of costs and charges to institutional investors”, including pension funds, it has made recommendations to the FCA on templates for data collection and disclosure.

The FCA has stated that it welcomes the recommendations, and that the FCA will continue to work with investors and industry to play its part in the next steps.

A new group will be formed over the summer to “to own the outputs of the work so far” and answer questions about the new templates, with a launch planned in the autumn. The full IDWG report, including the templates, will be released once the new group has been convened.

FCA policy statement on final 2018/19 fees and levies

On 3 July 2018, the FCA published a policy statement on the final regulated fees and levies for 2018/19 for the FCA, FOS, MAS, Pension Wise, and the forthcoming Single Financial Guidance Body. The rules for the 2018/19 fees and levies came into force on 2 July 2018.

The FCA has an online fees calculator that firms can use to work out their individual fees. It will invoice fee-payers from July 2018 onwards for their 2018/19 periodic fees and levies.

FCA consults on introduction of a financial services directory

On 4 July 2018, the FCA published a consultation paper on the creation of a new directory of financial services workers. The Directory will be a searchable public register through which customers will be able to find individuals who hold suitable qualifications and have a relevant role at an FCA authorised firm. The FCA hope that this will “help to reduce the risk to consumers, particularly those that are vulnerable, receiving poor quality advice or falling victim to scams”. The FCA is also proposing improvements to the financial services register.

In preparing the changes, the FCA considered the recommendations of the Work and Pensions Select Committee in their report on British Steel, which included that the FCA “name firms and individuals suspended from providing pensions advice. It should take immediate action to make such suspensions clear at the top of register entries and in search results.”

Comments can be made on the proposals until 5 October 2018

PLSA publishes final recommendations on improving retirement incomes

On 5 July 2018, the PLSA published its report, Hitting the Target: A Vision for Retirement Income Adequacy, which sets out the conclusions of a consultation “designed to help everyone achieve a better income in retirement”.

The report found that 80% of people are not sure whether they are saving the right amount for retirement, and that just over half (51%) wrongly think the auto-enrolment minimum pension contribution level is the Government’s “recommended amount” to save for their retirement.

The PLSA is calling on the Government, pensions sector, and regulators to work together to take forward its recommendations, which include producing “Retirement Income Targets” that show the lifestyle someone could afford on different levels of income; raising minimum automatic enrolment contribution levels; and increased support at retirement, with signposting to appropriate product options.

TPR master trust code of practice laid before Parliament

On 2 July 2018, TPR published its response to the Master trust code consultation, alongside the version of the Code that has now been laid before Parliament.

From October 2018, master trusts will have to apply to TPR for authorisation to operate in the market. The Code outlines how master trusts will be expected to meet the new authorisation criteria and what they will need to evidence for TPR to grant authorisation and to continue to operate in the market. If an existing master trust chooses not to apply for authorisation or does not meet the authorisation criteria, it will have to wind up and exit the market. New master trust schemes will have to be authorised before they can begin to operate in the market. Authorisation will commence on 1 October 2018, and existing schemes will have six months from that date to apply to TPR for authorisation.

TPR will publish guidance to accompany the code and the authorisation and supervision regime separately.