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Pensions: what’s new this week 13 December 2021

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13 December 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 new blog post from the Pensions Regulator on the risks of weakening employer covenants and its new powers; and new data matching guidance aimed at helping schemes prepare for pensions dashboards. 

New TPR blog post: risks of weakening employer covenants, PSA21 powers

The Pensions Regulator (TPR) has published a new blog post discussing some of the pressures faced by trustees in the current economic climate. TPR expects trustees to remain vigilant to sponsor-side risks; engage in risk assessment and contingency planning; and maintain strong, open relationships with employers. The blog post states that TPR ‘will use the full force of our enhanced powers if we feel a scheme is not being treated fairly by a sponsoring employer, or if a trustee board is not acting in the best interest of savers’.

The blog post also notes recent TPR regulatory activity targeted at the risk of weakening employer covenants. TPR contacted over 400 DB schemes to check that trustees had considered the risk that their sponsoring employer’s ability to support the scheme had weakened, and if they had considered (or are going to consider) TPR’s guidance in this area. Some schemes that were considered most at risk of a weakening covenant also had more in-depth engagement with TPR. TPR has opened nine cases (eight from the sub-set of higher-risk schemes and one from the main group) to investigate whether it would be appropriate to take further action.

The blog post also discusses TPR’s new powers under the Pension Schemes Act 2021. Although TPR notes that it is too early to say whether the Act will shift the balance of powers between employers and trustees, initial feedback to TPR suggests that the new powers are resulting in better engagement from employers and other stakeholders with pension schemes. It also states that employers who are ‘doing the right thing’ should not be worried about the new powers.

Read the blog post.

Dashboards: new PASA guidance on data matching

The Pensions Administration Standards Association (PASA) has published new data matching convention (DMC) guidance. This is aimed at helping schemes prepare for the launch of pensions dashboards.

The full detail of how dashboards will operate, including the staging process and trustees’ legal duties, is not yet known, but the government and the Pensions Dashboards Programme have repeatedly urged schemes to begin their preparations. When dashboards are launched, schemes will need to match ‘find requests’ from users of dashboards against their records – the new DMC guidance is aimed at helping schemes decide their approach to matching; it includes some suggestions and examples, but is not intended to be prescriptive.

The government is expected to launch its consultation on the draft regulations for dashboards in the near future.

Read the guidance.

PSA21: new commencement instrument on CDC schemes

Further provisions of the Pensions Schemes Act 2021 relating to collective DC (CDC) schemes will come into force from 13 December 2021. These relate to regulation-making powers for the government and TPR codes of practice (including the requirement for TPR to issue a code of practice on the authorisation process, and how it will determine whether the authorisation criteria are met).

The government consulted on proposed draft regulations for CDC schemes over the summer, but has not yet published its response.

Read the commencement instrument.

Purple Book 2021

The Pension Protection Fund (PPF) has published the 2021 edition of the Purple Book, which contains its assessment of the risk profile of UK defined benefit schemes. The data indicates a continued trend for de-risking assets, as schemes continue to move investment allocations away from equities to bonds. The overall net funding position improved and the aggregate funding ratio also increased, but the PPF notes this increase was mainly the result of market movements. The PPF also observed a reduction in the number of contingent assets submitted to the PPF (largely due to fewer Type A guarantees being certified).

Read the press release.

Read the Purple Book.

Reminder: CMA reporting deadline

Trustees of many schemes are subject to rules by the Competition and Markets Authority (CMA) on setting strategic objectives for investment consultancy providers and tendering for fiduciary management services.

Trustees of relevant schemes need to submit an annual compliance statement and signed certificate to the CMA by 7 January 2022. In-scope schemes will be familiar with this exercise from last year. Trustees should ensure that the statement and certificate are completed and submitted by the deadline. The CMA accepts documents with electronic signatures. For further information or assistance, please contact your usual Allen & Overy adviser.