Pensions: what’s new this week 15 November 2021
15 November 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: changes to statutory transfer rights; a reminder of the CMA reporting deadline; and upcoming restrictions on charging flat fees on small pots
- Changes to statutory transfer rights: action required
- Reminder: CMA reporting deadline
- Combination charging structures: changes from April 2022
- New PASA guidance: data management controls, GMP reconciliation transition
Changes to statutory transfer rules and processes will apply from 30 November 2021 – new regulations come into force on this date, and the Pensions Regulator (TPR) has published guidance on the new requirements.
Although the new red and amber flag process has been expected for some time, there have been some significant changes from the draft proposals, and trustees and administrators will only have a short period of time in which to make the necessary changes before the new requirements apply. Transfer requests made on or after 30 November will be subject to the new rules. Trustees should be urgently reviewing processes with administrators, and considering training and further legal advice as appropriate. Read more about the changes and action points in our briefing.
Trustees should also note that:
- TPR still expects members to be given the ScamSmart leaflet and, in respect of DB benefits, the specific transfer insert and a link to information by the Financial Conduct Authority: read more;
- TPR has updated its scams pledge to reflect the changes: read about the pledge. TPR notes that over 350 organisations have pledged or self-certified that they are following the principles of the pledge;
- a new version of the industry code of practice on scams is expected later this year: read the current code;
- the Pensions Administration Standards Association (PASA) will be revising its proposed code on DB transfers in light of the changes, and plans to publish the new code in early 2022: read more.
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. The government plans to replace the CMA regime, but the replacement regulations are not expected until next year.
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. The statement and certificate will need to be completed after the end of the annual reporting period in early December, and submitted to the CMA by the January deadline. The CMA accepts documents with electronic signatures. Trustees should ensure that the requirement to complete and submit the statement and certificate is noted as an action point for December.
The government has confirmed plans to implement, from April 2022, restrictions on the charging of flat fees on small pots – this will apply to small pots in default arrangements of DC schemes used for auto-enrolment that are subject to the charge cap. The restrictions will apply to all members (both active and deferred), and the de minimis pot size will be set at £100. The de minimis relates to the charging of the flat fee component of a combination charge (not the percentage charge). The consultation response indicates that the government will make some changes to the draft amending regulations as a result of feedback, in particular, to clarify that:
- a proportion of a flat fee may be charged on the value of a member’s rights, provided that the proportion charge does not itself reduce the value of the member’s rights to below £100; and
- where a flat fee is deducted more than once per member per valuation period within the same default fund, this will not contravene the rules, provided that any excess charge to the member is refunded or rebated within a reasonable period of time.
We are waiting for the government to publish the final version of the amending regulations, plus an updated version of guidance on the charge cap. The updated guidance is expected to contain examples of the operation of the de minimis, and to provide guidance on the intervals at which rights should be valued (in response to comments about the risk of market fluctuations impacting the application of the de minimis).
The government will shortly publish its response, and proposed next steps, in respect of its proposal to move to a single, universal, permitted charging structure (apparently the majority of feedback was against this proposal).
PASA has published two new guidance notes:
- Guidance on ongoing data management and controls, to support administrators in maintaining an accurate dataset: read the guidance. Many schemes are currently considering data quality and management issues as part of preparing for the launch of pensions dashboards; schemes have been urged to review and prepare data to ensure that they are ready for onboarding in due course: read more.
- A short note on GMP reconciliation projects where administration services are being transitioned between providers. Although the note focusses on GMP reconciliation, PASA comments that the principles could equally apply to other rectification and/or remediation projects. Read the guidance.