Pensions UK: What's new this week - 22 March 2021
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This week we cover topics including: the Pensions Regulator’s consultation on a new single code of practice; a consultation on proposed regulations under the Pension Schemes Act 2021; and a consultation on the charge cap.
- TPR consults on new single code of practice
- Government consults on new contribution notice test, TPR information-gathering powers
- Charge cap: government consults on incorporating performance fees
- MAPS announces new branding plans
- New TPO guidance: facilitating financial advice
- Auto-enrolment trigger and thresholds
- HMRC: Managing Pension Schemes service newsletter
- Government consults on audit and corporate governance reforms
- Dashboards: onboarding update
- TPR: DB/hybrid landscape report
- Calculating pension loss
The Pensions Regulator (TPR) has published its long-awaited consultation on a new single code of practice. The draft code will replace ten existing codes of practice, and includes new content on areas including the need for trustees to maintain effective systems of governance and to carry out own-risk assessments (these requirements flow from previous changes to the Pensions Act 2004 flowing from EU requirements). Other new material includes sections on information technology and climate change.
The code has been written to apply to ‘governing bodies’ of pension schemes (including trustees of occupational schemes and scheme managers of public service schemes). As some content is not applicable to all governing bodies or schemes, TPR has said it is aiming to make this clear in the relevant modules, and is asking for feedback where this is unclear. The consultation document includes a high-level table indicating where users may find new content that is relevant to them (depending on scheme type). However, at almost 150 pages long (and with 51 modules), it will be a significant task for trustees to review the draft content in its entirety.
The current consultation is the first phase of TPR’s project on the single code of practice; it plans to review and incorporate other materials (both codes and guidance) at a later date. It will also add content relating to the Pension Schemes Act 2021, and TPR’s work on the future of trusteeship, in later phases.
The consultation closes on 26 May 2021. If you have any questions about the draft code, or comments that you would like us to include in our consultation response (on an anonymous basis), please speak to your usual Allen & Overy adviser.
The government is consulting on proposed regulations on new TPR powers under the Pension Schemes Act 2021 relating to the ‘employer resources’ test for a contribution notice, and information-gathering powers. The final regulations are expected to come into force in October 2021.
The employer resources test
The draft regulations set out how an employer’s resources are to be determined and valued for the purposes of the new employer resources test. This test is met where TPR is of the opinion that an act (or failure to act) has reduced the value of the resources of the employer, and that that reduction was material relative to the estimated section 75 debt. Having considered various options, the government proposes that the resources of the employer for this purpose should be the normalised profits of the employer before tax (removing non-recurring or exceptional items). TPR would have the power to determine whether an item is to be treated as non-recurring or exceptional, the value of any such items, and the effect of the act or omission on the resources of the employer.
Meeting the ‘employer resources test’ will not automatically mean that the test for a contribution notice is met: even where the statutory defence does not apply, TPR must be of the opinion that it would be reasonable to impose liability. Potentially, even if an employer’s profitability has reduced as a result of an act or omission, that employer might still be able to support the scheme (for example, due to assets not taken into account in the profitability assessment), meaning that the imposition of a contribution notice might not be reasonable.
The draft regulations set out the information to be contained in a notice issued by TPR for someone to attend an interview; how new inspection powers apply for multi-employer schemes; and the fixed or escalating penalty rates for non-compliance with information-gathering requests. The government is proposing to set the fixed penalty at £400; for escalating penalty notices the daily rate for continuing non-compliance would be £200 for an individual, and otherwise from £500 (day 1) to £10,000 (from day 20 onwards).
The consultation closes on 29 April 2021. If you have any questions about the consultation, or comments that you would like us to include in our consultation response (on an anonymous basis), please speak to your usual Allen & Overy adviser.
The government has launched a new consultation on the charge cap for default funds in auto-enrolment schemes (as indicated in Budget announcements). The consultation:
- Sets out the government’s response to the proposed changes to the charge cap covered in its September 2020 consultation on a number of changes to DC governance, investment and consolidation. The government is planning to publish the remainder of its response to that consultation as well the present consultation (including final draft regulations and final statutory guidance) in June 2021, with regulations to come into force in October 2021. Read our briefing on the September 2020 consultation.
- Seeks views on draft regulations on the treatment of performance fees, including the extent to which these would achieve the policy intent of facilitating investment by DC auto-enrolment schemes in illiquid assets such as venture capital.
- The government considers that trustees should ‘look-through’ any fund of funds or pooled investment vehicles and consider the costs of investing in the pooled vehicle as well as the costs paid by the manager in relation to the underlying investments. It is seeking input on whether this approach is a potential barrier to investment in alternative asset classes, particularly venture capital and growth equity, and any solutions.
The consultation closes on 16 April 2021.
The Money and Pensions Service (MAPS) has announced plans to retire legacy brands (the Money Advice Service and The Pensions Advisory Service) and websites, and to launch a new brand called MoneyHelper from early June 2021. Pension Wise will continue as a named service under the MoneyHelper umbrella.
MAPS will produce a toolkit and guide for stakeholders to ensure that they are ready to signpost to MoneyHelper from the start of the rollout.
The Pensions Ombudsman (TPO) has published a guidance note on its approach to the provision of factual information in respect of independent financial advisers (IFAs). The guidance includes the approach that TPO would expect to be taken where members are provided with a list of independent financial advisers, including careful selection and ongoing monitoring, and factors that TPO would consider in the event of a member complaint relating to the advice received from such an IFA (for example, whether there had been maladministration in failing to undertake sufficient due diligence in compiling the list of IFAs).
The government has published the order amending the upper limit of the qualifying earnings band from 6 April 2021. The government announced in January that:
- the auto-enrolment earnings trigger would remain at £10,000; and
- the lower limit of the qualifying earnings band would remain at £6,240, and the upper limit of the qualifying earnings band would increase to £50,270 (from £50,000).
The order also sets out rounded figures for pay reference periods of less than a year.
HMRC has published a newsletter providing updates on the Managing Pension Schemes service, including new features, accounting for tax and the migration of schemes from Pension Schemes Online to this service. There are a number of potential action points for trustees and administrators in the newsletter.
The government is consulting on a package of measures aimed at improving the UK’s audit, corporate reporting and corporate governance systems. It proposes changes to the rules on the payment of dividends, including a statement by directors on the legality of the dividend and that payment of the dividend is not reasonably expected to threaten the solvency of the company in the following two years. Noting the importance of dividends to pension funds, the government seeks feedback on any potential adverse effects (such as an unnecessary reduction in the level of dividends paid by UK companies). The consultation closes on 8 July 2021.
The Pensions Dashboards Programme (PDP) has published a blog post reporting on its onboarding strategy, and steps for pension providers. Voluntary onboarding is currently planned from 2022 (with mandatory onboarding from 2023).
Pension schemes are urged to continue to prepare their data for onboarding; and to develop their strategy for connecting to the dashboard. Schemes that are interested in participating in the voluntary onboarding phase are encouraged to contact the PDP.
TPR has published its annual report on DB and hybrid pension schemes, taken from information on the pension schemes register as of 31 March 2020. The data shows a continuing decline in the number of schemes that are open to the accrual of DB benefits.
The Employment Tribunal has updated its guidance on calculating pension loss; a new basic guide has also been published to accompany the revised principles.