Pensions UK: What's new this week - 4 May 2021
04 May 2021
Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.
This week we cover topics including: a government review of the DC Chair's statement; new obligations to report information to HMRC; and a consultation on changes to asset class information provided annually by DB schemes.
- Government review of the DC Chair’s statement
- New RTI reporting obligations
- Consultation on changes to annual asset class information by DB schemes
- PPF: changes to valuation assumptions
- Climate change, stewardship and pensions: new Parliamentary inquiry
- HMRC: Pension Schemes Newsletter no. 129
- Pensions Academy online: week commencing 10 May 2021
The government has published the outcome of a statutory review of certain DC governance requirements, including the DC Chair’s statement provisions. The review noted that the current approach to the Chair’s statement does not achieve the policy objectives – in particular, using a single statement to try to achieve multiple policy goals, in respect of scheme governance and member engagement, does not work. It also noted industry feedback, including: the intended audience is unclear; the statement is too long, complex and costly to produce; and the mandatory penalty regime is inappropriate.
The review concluded that the government and the Pensions Regulator (TPR) should consider the audience and role of the Chair’s statement, and revisit the information to be contained in the statement – as part of this, the government will consider whether the statement should be used to disclose whether trustees have requested costs and charges information using the industry CTI templates: view the templates. It also indicated that the government should consider the mandatory penalty regime and whether TPR should be granted some discretion – although outside the scope of the review, there was significant feedback from stakeholders on this issue.
Given the conclusions of the review, changes to the current framework are expected. However, there is currently no indication of the timing for any further engagement, or implementation of changes.
New regulations will extend existing requirements to provide information to HMRC under the Real Time Information (RTI) system.
Currently, payments of PAYE pension income must be reported by the payer to HMRC; the RTI reporting requirement will now be extended to cover certain non-taxable payments made after a member’s death that are not taxable as PAYE income, including pension payable after the death of a member and some lump sum death benefits paid to beneficiaries. The changes are aimed at providing HMRC with complete information about an individual’s pension payments and to help ensure individuals pay the correct amount of income tax.
The regulations come into force on 6 April 2022.
TPR and the Pension Protection Fund (PPF) are consulting on changes to the asset class information provided annually by DB schemes, to reflect wider changes in scheme asset allocations. The proposed changes would, for example, enable TPR and the PPF to differentiate between bond allocations with differing maturities, rather than simply between bonds and equities.
TPR and the PPF are proposing a tiered approach, based on scheme size (although there are some proposed changes to the information required that would apply across all tiers). Smaller schemes (Tier 1) would provide information at the current level of detail; larger schemes (Tier 2 and Tier 3) would be required to provide more granular information, with additional requirements applying to the largest schemes in Tier 3. Schemes would be able to ‘trade up’ tiers to voluntarily provide more information.
Feedback is requested on the proposals for setting the tier boundaries – the proposed boundary between Tier 1 and Tier 2 schemes is GBP20 million (based on section 179 liabilities at the most recent valuation); and GBP1.5 billion for the boundary between Tier 2 and Tier 3 schemes.
The consultation closes on 10 June 2021.
The PPF has announced changes to valuation assumptions, following a consultation earlier this year on updating the assumptions to bring these into line with current market pricing in the bulk annuities market.
The changes are in line with the proposals set out in the consultation (apart from one change for section 143 assumptions). The changes come into effect from 1 May 2021.
Ahead of COP26 this November, the Work and Pensions Committee is calling for input on the government’s approach to pension scheme stewardship, how it compares to approaches taken internationally, and how pension schemes can be supported to make climate-conscious investment decisions. The deadline for responding is 18 June 2021.
HMRC’s latest newsletter includes statistics on tax repayment claims for flexible payments from pensions and on the registration of new pension schemes; updates on the Managing Pension Schemes service; and confirmation that the annual allowance calculator has been updated to include the tax year 2021/22.
Our next Pensions Academy sessions will take place online from 9.30am to 10.30am on the following dates:
Monday 10 May – Governance: new Code, new practices
TPR is consulting on a ‘single Code of Practice’ which should eventually consolidate existing Codes and guidance. But the draft Code doesn’t just consolidate – it adds or increases new regulatory expectations in some areas, and it deals with entirely new requirements, including the formalisation of a risk management function for each pension scheme, and the requirement to perform regular ‘own-risk assessments’. We’ll guide you through the changes and help you prepare for the new requirements.
Wednesday 12 May – Pension scheme investing: the sustainability revolution
Pension scheme investment decisions have been an area of increasing regulatory focus in recent years, but the TCFD-style reporting requirements that are due to affect some schemes from 1 October 2021 are probably the most significant change yet. Experts from our investment team will guide you through the changes they are seeing in this area of increasing public interest and political attention.
Friday 14 May – Legal update: what’s now and what’s next?
It’s already been a busy year for consultations and new developments but there’s much more to come as the government and regulators work through their 2020 backlog. Members of our Pensions team will update you on the current state of play and what’s on the horizon to shape your future agenda.
Register here to participate in any of these webinars.