Pensions Round-Up MARCH 2021 - DLA Piper
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MARCH 2021 Pensions Round-Up
PENSIONS ROUND-UP Contents Introduction��������������������������������������������������������������������������������������������������� 3 The Pensions Regulator and The Pensions Ombudsman������������������� 4 HM Treasury and Legislation�������������������������������������������������������������������� 8 Department for Work and Pensions ������������������������������������������������������� 9 Other news���������������������������������������������������������������������������������������������������� 12 On the horizon��������������������������������������������������������������������������������������������� 14 Contact details��������������������������������������������������������������������������������������������� 15 2
DLAPIPER.COM
Introduction
• HMRC: a Managing Pension
Welcome to the latest edition of DLA Piper’s Pensions
Schemes service newsletter; and a
Round-Up newsletter in which we provide an countdown bulletin about the end
of contracting-out.
overview of developments in pensions legislation and
• Pensions dashboards:
regulatory guidance.
guidance from the
Pensions Administration
In this edition we look at key developments from Standards Association.
March 2021 including the following. • Work and Pensions Committee:
the publication of the Committee’s
• The Pensions Regulator: • Legislation: the publication report in relation to its inquiry on
the publication of the Regulator’s of the Finance (No. 2) pension scams.
corporate strategy; a consultation Bill; and regulations in relation
• Public service pension schemes:
on a draft policy in relation to the to the upper limit of the
the response to the October 2020
investigation and prosecution automatic enrolment qualifying
consultation about indexation of
of new offences in the Pension earnings band.
Guaranteed Minimum Pensions.
Schemes Act 2021; a consultation
• Department for Work and
on the first phase of the • On the horizon: a timeline
Pensions: the response to the
Regulator’s work on its single of some of the key future
December 2020 consultation
code of practice; and an updated developments in pensions to
on changes to the general levy;
version of the FCA and Regulator’s help employers and trustees
a consultation about regulations
guide for employers and trustees plan ahead.
to be made under the provisions
on providing support with
of the Pension Schemes Act 2021
financial matters. If you would like further information
on Contribution Notices and the
about any of the issues raised in
• The Pensions Ombudsman: Regulator’s information gathering
this edition of Pensions Round-Up,
the publication of information powers; a consultation on
please get in touch with Cathryn
about TPO’s approach to the performance fees and the charge
Everest or your usual DLA Piper
provision of factual information cap; and a Call for Evidence on
pensions contact. Contact details
in respect of independent consideration of social risks and
are at the end of this newsletter.
financial advisers. opportunities by occupational
pension schemes.
3PENSIONS ROUND-UP
The Pensions Regulator and
The Pensions Ombudsman
Reporting duties – to the discussion paper and the security (savers’ money is secure);
a reminder final version of the strategy – TPR value for money (savers get good
In April 2020, the Regulator Strategy: Pensions of the future – value for their money); scrutiny
introduced easements in relation which establishes the Regulator’s of decision-making (decisions
to reporting requirements commitment to put the pension made on behalf of savers are in
including that, in recognition of saver at the heart of its work. their best interests); embracing
the challenging environment for The strategy analyses different innovation (the market innovates to
employers, it asked providers and groups of savers by generation, meet savers’ needs); and bold and
trustees to report late contribution looks at the pensions landscape and effective regulation (TPR is a bold
payments at 150 days late, rather how it will evolve, and sets out five and effective regulator).
than the 90 days set out in its strategic priorities.
codes of practice. From 1 July 2020, Alongside the strategy, the Regulator
reporting requirements resumed The Regulator reports that published a blog post by its Chief
as normal, but this easement changes made to the strategy Executive which notes that these
continued in relation to late payment following roundtable discussions high level priorities indicate its
of contributions (other than deficit and responses to the discussion core areas of focus and that,
repair contributions). In September document include: (1) a firmer underpinning each, will be
2020, the Regulator updated recognition of savers’ keen interest regulatory action which looks to
its guidance to state that, from in investment decisions consistent improve outcomes for savers.
1 January 2021, it was asking DC with their values, ESG and climate The blog post states that the detail
schemes and providers to revert change, which will drive a greater behind the Regulator’s day-to-day
to reporting payment failures that demand for stewardship; (2) a work will be set out via three-year
are 90 days, rather than 150 days, greater emphasis on protecting and corporate plans. However, it provides
outstanding. The Regulator stated enhancing outcomes for all savers, some examples including that:
that it expected all schemes to in addition to clearer recognition (1) under security, the Regulator will
return to 90 day payment failure of the impact of protected continue to focus on DB outcomes
reporting as soon as possible after characteristics such as disability, and do all it can to stop scammers in
1 January 2021, but acknowledged gender, age and ethnicity on saver their tracks by working with partners
that this change would have an outcomes; and (3) a commitment to across Project Bloom; and (2)
impact on systems and processes. move quickly on value for money, on value for money, the Regulator
It therefore allowed up to 1 starting with work with the FCA will work with the FCA to bring about
April 2021 for schemes that may to assess what represents value a consistent framework to assess
need the extra time to make for savers. not just costs and charges, but value
the necessary adjustments and for savers. The response to the
work with employers to bring any In relation to the Regulator’s discussion document also includes
outstanding contributions up to commitment to put the pension that the Regulator will shortly launch
date. However, 90 day reporting saver at the heart of all that it a first discussion paper on the topic
became mandatory for all providers does, the strategy includes that: of value for money.
from 1 April 2021. (1) savers who are building their
pension pots can expect it to Consultation on draft
Corporate Strategy enhance the quality of their savings policy on new powers
In the October 2020 edition of outcomes; and (2) savers that have The Pension Schemes Act 2021
Pensions Round-Up (page 5), we built up pension pots and are in contains provisions introducing new
reported on the publication by the or approaching retirement can powers for the Regulator, including
Regulator of its provisional 15 year expect it to protect the money that two new criminal offences which are
corporate strategy for discussion they have saved. The strategy sets expected to come into force in the
with stakeholders. On 10 March the out five strategic priorities and a autumn: the offence of avoidance
Regulator published its response strategic goal in relation to each: of employer debt and the offence
4DLAPIPER.COM
of conduct risking accrued scheme The new draft code represents an effective system of governance
benefits. On 11 March the Regulator the Regulator’s ambition to create which is proportionate to the size,
published a consultation on a draft a single point of consistent and nature, scale and complexity of the
policy setting out its proposed up to date information for all activities of the scheme. The scheme
approach to the investigation and pension scheme governing bodies. governance module in the new
prosecution of these new offences. A key aim for the new code is to code includes information on this
You can read more about the draft create consistency in expectations requirement. It provides links to
policy in our Pensions Alert dated 18 between different scheme types, other modules which an effective
March 2021. subject to the different legislative system of governance should cover,
requirements placed on different with these modules relating to the
Single code of practice schemes according to their type, topics of management of activities,
nature or size. organisational structure, investment
BACKGROUND
matters, and communications and
The Occupational Pension Schemes
The new code is designed to be a disclosure. The draft module also
(Governance) (Amendment)
web-based product. The Regulator contains information about regular
Regulations 2018 (Regulations)
has broken down the themes internal review of the elements of
transposed certain provisions of
from its current codes of practice the effective system of governance.
the IORP II Directive in relation
to form 51 shorter, topic-focused
to pension scheme governance
modules, with each module setting OWN RISK ASSESSMENT
into national law. The Regulations
out its expectations in relation The Regulations set out certain
replaced the statutory requirement
to a topic. The 51 modules are matters which the code must cover,
for trustees to establish and
divided into five main subject which include the carrying out and
operate internal controls with
areas: the governing body; funding documentation of an “own-risk
a requirement to establish and
and investment; administration; assessment” (ORA) of the system of
operate “an effective system of
communications and disclosure; governance by trustees of schemes
governance including internal
and reporting to the Regulator. which have 100 members or more.
controls” which is proportionate
The Regulator notes that most of This is therefore an area where the
to the size, nature, scale and
the expectations are already in draft code includes new content.
complexity of the activities of the
the current codes and, unless an Points of note in the draft code in
scheme. The Regulations provide for
expectation is new, schemes should relation to the ORA include that:
the detail of this new requirement to
therefore already be meeting the (1) it is an assessment of how well
be set out in a code of practice to be
provisions set out in the new code. governance systems are working
issued by the Regulator. In July 2019
The Regulator also makes it clear and the way potential risks are
the Regulator published its Single
that setting out its expectations in managed; (2) the governing body
code of practice statement, reporting
lists does not mean that they are should carry out an ORA that is
that it will be reviewing its codes of
‘tick-box’ governance requirements. proportionate to the size, nature
practice to reflect the Regulations
and complexity of the scheme;
and that it expects that this will
Annex 2 to the consultation (3) the governing body should
involve combining the content of its
identifies the relevant existing prepare and document its first
15 current codes to form a single,
code content relating to each ORA within one year of the new
shorter code. On 17 March 2021 the
of the draft modules in the new code coming into force; and (4)
Regulator published a consultation,
code. Draft modules which are each subsequent ORA should be
which runs until 26 May, on the first
identified as new content include carried out and documented within
phase of this work.
those relating to the remuneration 12 months of the last. The module
policy, scheme governance, own risk also sets out information about
STRUCTURE OF THE NEW CODE
assessments, stewardship, climate documentation of the ORA and the
This first phase of the Regulator’s
change and cyber controls. areas that should be covered when
work brings 10 of the current
carrying out an ORA.
15 codes together as one, with
EFFECTIVE SYSTEM OF
the Regulator noting that, while
GOVERNANCE NEXT STEPS
consolidating these 10 codes, it has
As set out above, the Regulations The existing codes that the draft
reduced the number of pages
introduce a requirement for single code does not yet cover
by nearly half (though the PDF
trustees to establish and operate are those relating to: notifiable
version still stands at 149 pages).
5PENSIONS ROUND-UP
events; funding defined benefits; over suspected scams following having regard to the circumstances
modification of subsisting rights; a concerning long-term drop in of the case and the Regulator’s
circumstances in relation to reporting”. It states that data from statutory objectives. The policy
the material detriment test; Action Fraud shows a steady fall in states that examples of settlement
and authorisation and supervision pension scam reports, from 1,788 in might include an acceptable cash
of master trusts. The Regulator 2014 to 358 in 2020. The Regulator sum in a Contribution Notice case
states that modules representing also states that, while there has or an undertaking not to act as
the content of these codes will been a slight rise in reporting so far a trustee in a prohibition case. It
be added in future phases, and in 2021, it is calling on industry to includes some other examples
notes that the modules relating be on high alert and to sign up to of settlement options, as well as
to DB funding are expected to be its Pledge campaign to help combat information on subjects such as
ready for consultation at the end pension scams. It notes that, so far, general principles, settlement
of 2021. The Regulator will also more than 200 organisations have discussions, settlement offers,
be adding content relating to the signed up to the Pledge campaign, engaging external stakeholders,
Pension Schemes Act 2021 and which is designed in part to decisions on settlement, after
other forthcoming legislation as it encourage better reporting. settlement is agreed and
becomes ready. At this stage, the consequences of settlement.
Regulator is not adopting into the Settlement policy
new code any of the findings from On 25 March the Regulator Cross-border schemes
its recent consultation on the future published its Settlement policy which In the February 2021 edition of
of trusteeship; it states that events sets out the approach it will take Pensions Round-Up (page 5),
over the past year have delayed this when negotiating and concluding we reported that the Regulator
work and it will be recommenced in settlements of its regulatory or had updated its guidance on
due course. civil enforcement action, and Cross-border occupational pension
what it expects from those who schemes: arrangements following the
The consultation states that a come to it with a proposal. The end of the Brexit transition period.
project to review the Regulator’s policy is for employers, trustees or On 31 March the Regulator made
guidance in line with the new anyone else who is a target of, or further changes to this guidance
code will start later in 2021. It also directly affected by, the Regulator’s to update the information about
notes that: (1) in time, the new regulatory or civil enforcement automatic enrolment duties.
code has the potential to bring the action. This approach will not apply The updated information includes
Regulator’s codes, guidance and to certain listed issues including that: (1) since the end of the Brexit
the Trustee Toolkit together; (2) full criminal proceedings, judicial review transition period, the rules for using
integration will require an audit proceedings and enforcement of EU/EEA-based schemes to meet
and review of around 200 pieces of automatic enrolment duties under automatic enrolment duties have
existing guidance, across various the Pensions Act 2008. changed; (2) whether employers can
phases of the development of continue using their EU/EEA scheme
the new code; and (3) there will For the purposes of the policy, for automatic enrolment purposes
therefore be a period when the the Regulator defines settlement after 1 January 2021 will depend
new code and guidance are not as as “where the target of potential on whether it is an ‘automatic
closely related as will eventually be or ongoing enforcement action enrolment scheme’ or a ‘qualifying
the case. offers something in return for scheme’; and (3) employers should
The Pensions Regulator (TPR) check whether they are still able
Pension scams agreeing not to pursue or continue to use their EU/EEA scheme to
On 25 March the Regulator the action”. The Regulator states satisfy their automatic enrolment
published a press release stating that its high level aim for any obligations and consider taking
that the “pensions industry is settlement is that it should offer their own independent legal advice
being called on to raise the alarm a fair and appropriate outcome where appropriate.
6DLAPIPER.COM
Joint FCA and Statement also notes that the The Pensions
Regulator guide FCA has “added guidance on the Ombudsman
In June 2020 the Financial Conduct information employers and trustees PANELS AND INDEPENDENT
Authority (FCA) published a might want to give members to help FINANCIAL ADVISERS
consultation on guidance about them understand the relationship On 18 March, The Pensions
what it expects from firms when between the transfer value and the Ombudsman (TPO) published Panels
advising on pension transfers. DB scheme income, if they decide to and Independent Financial Advisers
The consultation also sought views give a transfer value”. which provides “generic information
on an updated version of the FCA and guidance” that outlines its
and Regulator’s joint guide for REFERRING MEMBERS FOR “approach to the provision of
employers and trustees about REGULATED ADVICE factual information in respect of
providing support to members The Guide notes that the FCA independent financial advisers”.
on financial matters. On 30 March knows that some employers or It provides some information
the FCA published its finalised DB trustees are worried that they about the FCA’s view on the issue
transfer guidance for advisers, and could be considered to be making of providing members with a list
the FCA and Regulator published arrangements with a view to of advisers, and also states that
the updated version of Guide for transactions if they refer members careful consideration should be
employers and trustees on providing for regulated advice. On this given as to the criteria under which
support with financial matters issue, the Guide includes that a the IFA firms are to be selected
without needing to be subject to FCA one-off exercise of identifying and retained or replaced over time.
regulation (Guide). In this article suitable advisers, such as providing TPO also states that consideration
we provide a brief overview of a list of advisers that scheme should be given to the inclusion of
two of the subjects considered by members may like to use, is by specified information in any factual
the Guide. itself unlikely to be considered information provided to members
to be making arrangements with about potential IFAs. TPO’s
TRANSFER VALUES a view to transactions ‘by way document also notes some of the
One of the issues considered by of business’. It also states that factors that would generally mean
the Guide is providing transfer arranging for scheme members that a scheme administrator or
values to DB members. The FCA’s to get independent advice on a other person would be in a stronger
Feedback Statement on its June broad range of pension products position in relation to any complaint
2020 consultation includes that they can transfer to is likely to fall submitted against it to TPO
some respondents asked for more outside the regulated activity of regarding its listed IFAs, although it
guidance on providing a member making arrangements with a view notes that TPO would assess each
with a transfer value that they to transactions. However, it states complaint on its own facts. TPO
have not asked for. The Feedback that for these purposes, it may be states that a scheme establishing
Statement includes that employers harder for a restricted advice firm an IFA panel should, where
and trustees “can give guaranteed to satisfy the requirement to give appropriate, seek professional
transfer values that members have independent advice. advice before proceeding.
requested” and they “may also give
transfer values if the member hasn’t Employers and trustees should FACTSHEETS
asked for them”. However, the Guide consider reviewing whether In March, TPO also published:
includes that they “should consider any changes are needed to the (1) a factsheet which explains
whether giving an unsolicited information that they provide to that, before it will investigate a
transfer value is likely to result in members in light of the updated complaint, the applicant must have
good outcomes for members”, Guide. In relation to the provision first tried to resolve matters with
and that some members “may of information on advisers, the party or parties that they think
misunderstand how a seemingly they should also note The are at fault, and provides some
large transfer value is equivalent Pensions Ombudsman’s recent information about how to do this;
to the level of scheme benefits on publication, which is referred and (2) a factsheet about its Early
offer”. The Feedback to below. Resolution Service which includes
information about what the service
is and how it operates.
7PENSIONS ROUND-UP
HM Treasury and Legislation
Budget designing the remedy to address Finance Bill
On 3 March the Chancellor the age discrimination found in the The Finance (No.2) Bill was
delivered the Budget 2021. 2015 public service pension reforms. published on 11 March. Following
In relation to pensions, the Budget the announcement in the Budget
document includes the The update document also states about the freezing of the standard
following announcements. that the government will be Lifetime Allowance (LTA), the Bill
reviewing the appropriate taxation includes a clause stating that
• The government will maintain framework for DB superfunds. specified provisions of the Finance
the Lifetime Allowance at its HM Treasury states that: (1) this work Act 2004 relating to indexation of the
current level of GBP1,073,100 in relation to the taxation framework standard LTA do not apply for the tax
until April 2026. will proceed alongside the work years 2021/22 to 2025/26. It states
under way on the development of that the amount of the standard LTA
• The government will issue a
the appropriate regulatory regime; for each of those tax years remains
consultation on whether certain
(2) this is an innovative area and it at the amount for the tax year
costs within the DC charge cap
should not be assumed that the 2020/21, which is GBP1,073,100.
affect pension schemes’ ability
tax regime that currently applies
to invest in a broader range of
to entities and transactions in the The Bill also contains provisions
assets. It states that this is to
superfund structure or the pension which set out the tax treatment
ensure that pension schemes
schemes that have transferred to the of collective money purchase
are not discouraged from such
superfund will remain unchanged; arrangements and benefits.
investments and are able to offer
and (3) the government’s approach The Explanatory Notes to the Bill
the highest possible returns
will be informed by the features of include that these amendments
for savers. It also states that
the permanent regulatory regime. “ensure that the unique nature of
the DWP will “come forward
those benefits can operate within
with draft regulations to make
GMPs Part 4 [of the Finance Act 2004]
it easier for schemes to take
The Guaranteed Minimum Pensions without creating unintended
up such opportunities within
Increase Order 2021 was made on unauthorised payments charges”.
the charge cap by smoothing
1 March and came into force on
certain performance fees over
6 April 2021. The Order specifies Automatic enrolment
a multi-year period”. The DWP
0.5% as the increase to apply to The Automatic Enrolment
subsequently published a
the part of Guaranteed Minimum (Earnings Trigger and Qualifying
consultation on performance
Pensions (GMPs) attributable to Earnings Band) Order 2021
fees and the charge cap on
earnings factors for the tax years was made on 15 March and
19 March. Further information on
1988/89 to 1996/97. came into force on 6 April 2021,
the consultation is on page 10 of
implementing the increase in the
this newsletter.
The Social Security Revaluation upper limit of the qualifying earnings
of Earnings Factors Order 2021 band from GBP50,000 to GBP50,270.
Tax policies and
was made on 8 March and also As reported in the January 2021
consultations
came into force on 6 April 2021. edition of Pensions Round-Up
On 23 March the government
This Order is made to ensure that (page 8), the lower limit of the
published a series of tax documents
earnings factors relating to National qualifying earnings band will remain
and consultations. HM Treasury’s Tax
Insurance contributions for historic at GBP6,240 and the qualifying
policies and consultations document
tax years, used in the calculation of earnings trigger will remain at
includes that the government will
additional State Pension and GMPs, GBP10,000. The Order also sets out
make technical updates to pension
maintain their value in line with the rounded figures for the earnings
tax rules to remove certain issues
increase in average earnings. thresholds for pay reference periods
identified during the process of
of less than 12 months.
8DLAPIPER.COM
Department for Work and Pensions
General levy supervisory focus continues to be 75 deficit. In relation to stage 3,
In the December 2020 edition on such schemes. The regulations the consultation states that the
of Pensions Round-Up (pages 8 setting out the 2021, 2022 and Regulator would put forward an
to 9), we reported on the DWP’s 2023 increases were also laid before argument on materiality particular
consultation on proposals for Parliament on 4 March and came to the facts of the case, as is
changes to the structure and rates into force on 1 April 2021. currently done with the material
of the general levy on occupational detriment test.
and personal pension schemes Consultation on PSA
from April 2021, 2022 and 2023. 2021 regulations It is also worth noting that the
The general levy recovers the On 18 March the DWP published consultation states that meeting
funding provided by the DWP in a consultation (which closed on the ‘employer resources test’ will
respect of the core activities of the 29 April) seeking views on the not automatically mean that a CN
Pensions Regulator, the activities of proposed drafting of two sets of will or should be issued, and that
the Pensions Ombudsman and part regulations relating to provisions the Regulator must show that it
of the activities of the Money and of the Pension Schemes Act 2021 is reasonable to impose a CN on
Pensions Service. The consultation (PSA 2021) concerning the Pensions the target.
explained that: (1) between 2013 Regulator’s powers.
and 2018, the cumulative surplus INFORMATION GATHERING
in the levy reduced; (2) since 2018, CONTRIBUTION NOTICES The PSA 2021 includes provisions
the cumulative balance has moved The PSA 2021 introduces two new which expand the Regulator’s
to deficit; and (3) the DWP estimates grounds for issuing a Contribution interview and inspection powers.
that, if levy rates were to remain Notice (CN), both of which are It also provides the Regulator with
unchanged, there would be a deficit subject to a statutory defence. new powers to issue fixed and
of around GBP230 million at the One of these new grounds is the escalating civil penalties for non-
end of 2023/24. The consultation ‘employer resources test’ which compliance with these provisions
set out three options that the DWP would be met in relation to an act or with a written notice issued
considered for changes to the or failure to act if the Regulator under its existing powers requiring
general levy. is of the opinion that: it reduced information to be provided.
the value of the resources of the The second set of draft regulations
On 4 March the DWP published employer; and that reduction was relate to these provisions and cover
the government response to the a material reduction relative to issues including: (1) the minimum
consultation which reports that, the estimated section 75 debt. information which must be included
following consideration of the The consultation proposes that, in an interview notice; (2) proposed
responses to the consultation, it has in relation to this new test, the modifications to the inspection
decided to proceed with the option ‘resources of the employer’ be power to set out how it applies to
that was stated to be the preferred determined as normalised profits of multi-employer schemes; and (3)
option in the consultation. This the employer before tax. the levels of fixed and escalating
option includes: (1) the introduction penalties. It is proposed that the
of separate sets of levy rates for The consultation also sets out the level of the fixed penalty will be
DB schemes, DC schemes other proposed process for determining, GBP400 and that, where the person
than master trusts, master trusts calculating and verifying the value is an individual, the level of the
and personal pension schemes; (2) of the resources of the employer escalating penalty will be GBP200 for
increases in the levy for 2021/22 which, in summary, involves: (1) each day that the non-compliance
of 10% for DB schemes and DC calculating normalised annual continues. In the case of escalating
schemes other than master trusts profit before tax (NAPBT) of the penalties imposed on those other
and 5% for master trusts and employer absent the “act”; (2) than individuals, it is proposed that
personal pension schemes; and (3) calculating the change to the NAPBT the rate will be GBP500 for the first
larger levy rate increases for DB attributable to the “act”; and (3) day and will increase cumulatively
schemes, as against other scheme comparing the difference between on each subsequent day by that
types, given the relative complexity the pre-act NAPBT and the adjusted amount until, after 20 days, the daily
of DB schemes and the fact that the NAPBT to the scheme’s section rate is GBP10,000.
9PENSIONS ROUND-UP
Performance fees and potential barrier to investment in supply chains, workforce conditions
the charge cap alternative asset classes, particularly and diversity and inclusion;
Following the announcement venture capital and growth equity. (2) company products and selling
made at the Budget on 3 March The June 2021 response will also practices, which includes factors
(reported on page 8 of this include a summary of responses such as product quality and safety
newsletter), on 19 March the received and next steps on and consumer protection; and (3)
DWP published a consultation this issue. companies in the community, which
entitled Incorporating performance includes factors such as community
fees within the charge cap. Social factors – Call engagement and impact on local
This consultation, which closed on for Evidence businesses. The Call for Evidence
16 April, contains the government On 24 March the DWP published also sets out: some resources which
response to the performance fee a Call for Evidence entitled provide data and information about
section of the DWP’s September Consideration of social risks and social factors; and some of the
2020 consultation (reported on opportunities by occupational ways in which social factors may
page 6 of that month’s edition of pension schemes, which runs be financially material, including
Pensions Round-Up) and consults until 16 June 2021. By way of regulatory risks, litigation risks
on consequential draft regulations. background, regulations relating and reputational risks. In relation
to occupational pension schemes to financial materiality, it states
The March 2021 consultation and investment require Statements that social factors can also be
reports that, given that the of Investment Principles to include opportunities, with the information
consensus emerging from the the trustees’ policies in relation to on opportunities including that
September 2020 consultation financially material considerations higher standards on social factors
was that introducing the option including environmental, social and may be a commercial advantage.
of smoothing performance fee governance (ESG) considerations.
payments over multiple years The Ministerial foreword to the The Call for Evidence also looks
would reduce the risk of a charge Call for Evidence notes concern at how trustees can take social
cap breach and could increase that social factors are not well factors into account. It states that
investment in illiquid assets, the understood. The Minister states there is no single “right” way to
government is bringing forward that he wrote to 40 of the largest consider social factors but notes
regulations. The draft regulations schemes in February 2021, several distinct approaches available
aim to supplement the two existing seeking information about their including screening, tilted funds,
permitted methods for calculating ESG policies and their stewardship voting and engagement. In relation
the scheme’s charges, with an policies and practices, and found to stewardship, the Call for Evidence
option to include a five year moving “performance to be mixed”. reports that the government is
average for performance fees. The Call for Evidence builds on this, closely considering the following
The consultation includes illustrative seeking views on the effectiveness recommendations made by the
examples to provide guidance on of occupational pension scheme Asset Management Taskforce in
how a multiple year smoothing trustees’ current policies and November 2020: (1) UK pension
approach would work in practice. practices in relation to social schemes should be required to
The government aims to publish a factors. It also seeks to assess how explain how their stewardship
response to this consultation and trustees understand social factors policies and activities are in scheme
to the remainder of the September and how they seek to integrate members’ best interests, and the
2020 consultation, including final considerations of financially material Pensions Regulator should issue
draft regulations and final statutory social factors into their investment related guidance on how trustees
guidance, in June 2021. The and stewardship activities. might evidence this; and (2) a
government’s intention is that the dedicated council of UK pension
regulations on performance fees will The Call for Evidence sets out some schemes should be established
come into force in October 2021. of the social factors that investors to promote and facilitate high
may wish to consider. The factors standards of stewardship of
The March 2021 consultation are divided into the following three pension assets.
also seeks views on the current areas: (1) practices within a company
position on look-through in relation and its supply chain, which includes
to charge cap compliance, as a factors such as health and safety in
10DLAPIPER.COM
A separate section in the Call for lead to proposed changes in assess and make recommendations,
Evidence about social factors policy”. It states that any changes as an interim step, on ways to
as opportunities notes that the in policy would be subject to tackle deferred, small pension pots.
government is already undertaking public consultation. In the December 2020 edition
substantial work to understand and of Pensions Round-Up (page 9)
address some of the barriers to Pension scams we reported on the publication of
trustees investing in private markets In a January 2021 evidence session a report by the Small Pots Working
including venture capital. It goes on before the Work and Pensions Group which set out a number of
to state that the government wants Committee, one of the issues recommendations. On 24 March
“to understand whether there are discussed by the Minister for the Pensions and Lifetime Savings
similar misunderstandings about Pensions and Financial Inclusion Association (PLSA) published a
the availability and viability for was sharing data in relation to press release reporting that a new
schemes of investment products pension scams. On 11 March the industry co-ordination group (the
that see social factors as financially DWP published a news story which Small Pots Co-ordination Group) has
material opportunities for investors reports that, since then, the Pension been established to take forward
to make a return”. It also states Scams Industry Group has been the recommendations of the Small
that: a further possibility for receiving a steady stream of new Pots Working Group. The press
investment opportunities focuses on applicants. However, the news release includes that the new group,
developing and emerging markets; story goes on to state that around which was jointly convened by the
the government believes these 90 large schemes still do not share PLSA and the Association of British
investments are not as common for data and the Minister has written Insurers, will: (1) direct relevant work
occupational pension schemes; and to those schemes calling on them across the industry, focusing on
it would like to understand why. to do so in order to create a clearer the administration processes that
picture of the scale of the issue. will underpin a future long-term
The Call for Evidence seeks to The news story includes the text of consolidation model in the interests
understand what the government the Minister’s letter. of savers; (2) examine existing
could do to ensure that trustees data-matching requirements,
are able to meet their legal Small pension pots common data standards and the
obligations in relation to social In September 2020 the DWP requirements for a low-cost transfer
factors. However, the DWP notes announced that the government process for mass consolidation;
that it is an information gathering had launched a cross-sector and (3) publish a progress report in
exercise which “may or may not working group with industry to the summer.
11PENSIONS ROUND-UP
Other news
HMRC newsletter Pensions dashboards or supplier, to understand the
On 16 March HMRC published On 2 March the Pensions options available and begin work
a Managing Pension Schemes Administration Standards on the best solution. The blog post
service newsletter which includes Association (PASA) published also notes that the PDP is keen to
an update on migration of pension guidance for pension schemes, speak to providers or individual
schemes from the Pension Schemes trustees and providers on how to pension arrangements which may
Online service to the Managing start getting ready for pensions wish to participate in the voluntary
Pension Schemes service. This dashboards. The guidance includes onboarding phase.
update includes that: (1) later this that, as early as possible in 2021,
year, scheme administrators will schemes and providers should make Data Management
be able to view a list of pension a plan to ensure that their data is Plans
schemes they need to migrate on ‘dashboard compliant’. The guidance On 22 March the Pensions
the Managing Pension Schemes is structured around three areas: Administration Standards
service; (2) in spring 2022, scheme (1) accessibility of pension records, Association (PASA) published
administrators will have the ability with action points including that guidance on Data Management
to select schemes from the list and schemes and providers should Plans (DMPs). PASA states that
provide up to date information on conduct an exercise to ascertain if developments in legislation
them; and (3) once the required they have any non-digital records and regulation (such as GMP
information has been submitted, and, if so, load these on to their equalisation and pensions
this will migrate the pension main admin system so that they dashboards) have “pushed data
scheme to the Managing Pension are accessible digitally; (2) accuracy quality and management to the top
Schemes service. An Appendix to of personal data items, with action of the agenda for both the trustees
the newsletter lists the information points including to determine which of pension schemes and their
that will be required so that scheme personal data items they will match employers”. The guidance states
administrators can prepare for this. against and consider how they can that the purpose of a DMP is for
assess and continually ensure these trustees to formalise their approach
Countdown bulletin data items are always accurate; to managing and improving their
On 25 March HMRC published and (3) availability of accrued pension scheme data. It also sets
Countdown Bulletin 54 in relation pension amounts. As the Pensions out a high level description of the
to the end of contracting-out. Dashboards Programme (PDP), DWP, information which may be included
HMRC reports that there were no FCA and Regulator publish more in a DMP. This is divided into four
significant delays to its proposed information, PASA will issue updated sections: (1) understanding pension
timeline of issuing final data cuts versions of its guidance. scheme data; (2) documenting
by the end of July 2020, but it processes for receiving, transferring
was unable to issue data cuts to On 12 March the PDP published and managing pension scheme
schemes with nil output or where a blog post entitled Building an data; (3) measuring data quality,
it has been unable to trace the onboarding strategy. In the blog implementing a data improvement
scheme administrator. The bulletin post, the PDP recommends that: plan and documenting process and
states that administrators should (1) organisations continue to control strengthening measures; and
contact HMRC if their scheme has work on their data, so that it is in (4) maintaining a record of decisions
not received its final data cut and the best shape possible ahead of and version control. However, PASA
they were appointed administrator connection to pensions dashboards; notes that the information that it
of a scheme before 31 July 2020. and (2) providers which have not has suggested should be included
The bulletin provides an email yet begun to identify a strategy is not exhaustive and should be
address to use for this purpose for connecting to the dashboard tailored for each pension scheme to
and states that the deadline for ecosystem, should work with their be appropriate and proportionate
requesting the final data cut is system team or provider and/or relative to its needs, objectives and
31 July 2021. their pension administration team ongoing activities.
12DLAPIPER.COM
Work and legislation should be published under the Public Service Pensions
Pensions Committee within 18 months of the regulations Act 2013 in relation to the period
In July 2020 the Work and Pensions being operational. It states that, 1 April 2020 to 31 March 2021.
Committee announced that it will be if there are any concerns about
conducting a three part inquiry into the operation of the policy, this will GMP INDEXATION
the impact of the pension freedoms allow legislative changes to be made The removal of the Additional
and the protection of pension during this Parliament. State Pension when the new State
savers. On 28 March the Committee Pension system was introduced
published its report in relation to the Money and on 6 April 2016 also removed the
first part of the inquiry which looked Pensions Service mechanism that fully indexed and
at pension scams. The Committee’s On 18 March the Money and equalised most public service
report includes that: “More than five Pensions Service (MaPS) published pension payments for members
years on from the introduction of the a press release reporting that it with Guaranteed Minimum Pensions
pension freedoms, the Government plans to launch a single offering for (GMPs). On 1 March 2016 the
and the regulators are still putting consumers called MoneyHelper. The government announced that, as an
in place the necessary support press release includes that: (1) since interim solution, it would continue
framework to tackle scams” and MaPS was formed, it has operated its with the previous practice for public
that its report “calls on them to act consumer services under the three service pensioners reaching State
quickly and decisively to protect legacy brands of the Money Advice Pension age after 5 April 2016 and
pension savers”. Service (MAS), The Pensions Advisory before 6 December 2018 and fully
Service (TPAS) and Pension Wise; (2) index their GMPs earned in public
The Committee’s report sets out MoneyHelper will bring these brands service. This was subsequently
a number of recommendations and services together in one place; extended to those reaching State
including that: (1) Action Fraud and (3) Pension Wise will continue Pension age on or after 6 December
should make it clear that the as a named service under the 2018 and before 6 April 2021.
industry should make reports MoneyHelper umbrella. MaPS states
of scam activity to it, and should that, from June 2021, it will begin In the October 2020 edition of
provide clear guidance and an rolling out the new MoneyHelper Pensions Round-Up (page 9), we
effective tool for the industry to do brand and website. reported that HM Treasury had
so; (2) Project Bloom should facilitate published a consultation on the
industry intelligence sharing and Public Service approach to take for members
the government should legislate Pension Schemes who will reach State Pension age
to require industry participation after 5 April 2021. On 23 March HM
INCREASES AND REVALUATION
in intelligence sharing at the next Treasury published the government
The Pensions Increase (Review)
opportunity; and (3) the Pensions response to the consultation
Order 2021 was made on 8 March.
Regulator should monitor and report which reports that: (1) the majority
It provides for an increase of 0.5%
twice annually to the Committee on of respondents favoured the
from 12 April 2021 for all official
the effectiveness of its pledge to permanent extension of full
pensions, except for those which
combat pension scams. indexation for those public servants
have been in payment for less than
with a GMP reaching State Pension
a year, which will receive a pro-rata
The Committee notes that the age from 6 April 2021, which was in
increase. The Public Service Pensions
Pension Schemes Act 2021 will allow line with the preferred stated policy
Revaluation Order 2021 was also
the member’s statutory right to of public service pension schemes;
made on 8 March. This Order
transfer to be restricted where there and (2) the government has decided
specifies the annual percentage
are signs of a pension scam and to make full GMP indexation the
change in prices and earnings
that regulations are expected to be permanent solution for public
to be applied for the purpose of
in place later this year. The report service pension schemes.
revaluation required by schemes
recommends that a review of the
13PENSIONS ROUND-UP
On the horizon
DATE DEVELOPMENT
Unknown In February 2020 the Regulator published the response to its July 2019 consultation on the future of trusteeship and
governance. Action points that the response identifies include that the Regulator will review and update its code of
practice on Trustee Knowledge and Understanding, review the Trustee Toolkit and establish and lead an industry
working group to find ways of supporting schemes to take steps to improve trustee diversity.
Following the publication of its October 2020 Statement of Policy Intent entitled Stronger Nudge to Pensions
Guidance, the DWP is expected to publish a consultation on draft regulations to implement its proposals.
2021 In April 2019 the DWP published guidance on GMP conversion which notes that the government is considering
changes to this legislation to clarify certain issues. The GMP Equalisation Working Group plans to publish
guidance on GMP conversion by the end of April 2021 and examples on anti-franking in the second quarter of
2021. The Group also plans to publish guidance on communications during the implementation stage and on
GMP equalisation and past transfers.
2021 Regulations to implement provisions of IORP II in relation to governance came into force in 2019 with the detail
of the new requirements to be set out in a code of practice. On 17 March the Regulator published a consultation
on the first phase of its work to combine its current codes to form a single, shorter code. The consultation closes
on 26 May 2021.
2021 Following the government’s March 2019 response to its consultation on Collective DC schemes, a framework
for such schemes is included in the Pension Schemes Act 2021. The DWP plans to consult on regulations in early
summer 2021.
Second half The Regulator’s second consultation on its DB funding code, which will focus on the draft code itself, is expected
of 2021 to be published in the second half of 2021.
Autumn The Pension Schemes Act 2021 includes provisions which amend the Regulator’s powers and introduce new
2021 powers. The aim is for the powers to be available to the Regulator by autumn 2021. In relation to the duty to
give notices and statements to the Regulator in respect of certain events, the DWP will consult on the draft
regulations later this year, for commencement as soon as practical thereafter.
Early In August 2017 the government confirmed that it will proceed with proposals to limit the statutory right to
autumn transfer in order to tackle pension scams. Regulation-making powers are included in the Pension Schemes Act
2021 2021. A consultation on draft regulations is expected in early summer 2021, with the regulations coming into
force in early autumn.
October The Pension Schemes Act 2021 includes provisions on climate change risk which set out powers to make regulations
2021 imposing requirements on trustees in relation to governance and disclosure. The DWP has published a consultation on
draft regulations and statutory guidance and it is proposed that the regulations will come into force on 1 October 2021.
October Annual Reports produced on or after 1 October 2020 have to include implementation statements. The information
2021 to be included in these statements depends on whether the scheme is a relevant scheme or a DB scheme. The first
report for DB schemes and certain information for relevant schemes must be published by 1 October 2021.
October In September 2020 the DWP published a consultation on proposals to improve outcomes for DC members
2021 which looks at issues including assessing value for members, consolidation and the charge cap. The consultation
closed on 30 October and it is proposed that the regulations will come into force on 5 October 2021.
2021 The DWP is expected to publish a consultation on a mandatory approach to simpler annual benefit statement
templates for DC schemes used for automatic enrolment.
2021 Provisions in relation to pensions dashboards are included in the Pension Schemes Act 2021. An indicative
timeline published by the Pensions Dashboards Programme in October 2020 estimates that phase 4 of the
2023
development of pensions dashboards, which will be the phase in which schemes will begin to be compelled
by law to connect to the dashboards ecosystem, will run from 2023. The DWP aims to consult on proposed
regulations for the pensions dashboard later in 2021.
14DLAPIPER.COM
Contact details
Cathryn Everest Ben Miller Andrew McIlhinney
Senior Professional Support Head of Pensions Partner, Leeds
Lawyer, London +44 (0)151 237 4749 +44 (0)113 369 2141
+44 (0)20 7153 7116 ben.miller@dlapiper.com andrew.mcilhinney@dlapiper.com
cathryn.everest@dlapiper.com
Tamara Calvert Matthew Swynnerton
Megan Sumpster Partner, London Partner, London
Professional +44 (0)20 7796 6702 +44 (0)20 7796 6143
Support Lawyer, London tamara.calvert@dlapiper.com matthew.swynnerton@dlapiper.com
+44 (0)20 7153 7973
megan.sumpster@dlapiper.com Joel Eytle Amrit Mclean
Partner, London Head of Pensions De-risking
+44 (0)20 7796 6673 +44 (0)20 7796 6613
joel.eytle@dlapiper.com amrit.mclean@dlapiper.com
15DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at dlapiper.com. This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. Copyright © 2021 DLA Piper. All rights reserved. | APR21 | A09574-2
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