Pensions: what's new this week 16 August 2021
16 August 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 blog post by the Pensions Regulator discussing the role of pension scheme trustees in the transition to a net zero economy; and new guidance by the GMP equalisation working group on transfer payments.
The Pensions Regulator (TPR) has published a blog post discussing how trustees can ‘make a difference’ in the transition to a net-zero economy, in particular:
- Encouraging trustees to hold advisers and asset managers to account by: monitoring whether expectations around climate-related risks and opportunities are being met; challenging asset managers and advisers to improve processes where appropriate; and considering re-tendering with mandated climate-related criteria or by appointing specialists (if these risks and opportunities are insufficiently considered by advisers).
- Emphasising the importance of stewardship – the blog post comments that a greater emphasis on stewardship, with clear goals, should improve long-term value and minimise risk from factors such as climate change. Trustees are urged to engage clearly with investment managers on stewardship and to develop a stewardship strategy. TPR also continues to encourage trustees to sign up to the 2020 Stewardship Code.
The blog post also encourages trustees and advisers to respond to TPR’s consultation on its approach to regulating new climate-related duties from 1 October 2021 (the consultation closes on 31 August).
The GMP equalisation working group has published a guidance note on transfer payments, following the further Lloyds decision last year. The guidance is aimed at helping schemes to identify a pragmatic approach, and discusses considerations for both transferring and receiving schemes in relation to individual transfers (including a key steps plan for transferring schemes), as well as a short section discussing historic bulk transfers.
The issue of equalisation top-ups on historic transfers is complex and there are a number of practical challenges. Please contact your usual Allen & Overy adviser to discuss the implications for your scheme.
The High Court has considered a claim by an individual for damages, following the cyber attack on Currys PC World and Dixons (DSG) several years ago. The claimant had purchased goods from the retailer and claimed that his personal data had been compromised in the attack. He alleged breach of confidence, misuse of private information, breach of the Data Protection Act 1998, and negligence. The judge struck out the claims based on breach of confidence, misuse of private information and negligence, but the claim regarding the Data Protection Act was stayed pending the outcome of an appeal by DSG against a GBP500,000 monetary penalty notice issued by the Information Commissioner’s Office (ICO) in 2020.
Cybersecurity is a key risk that schemes need to take seriously, ensuring that there are adequate controls to minimise the risk of an adverse incident, and that plans are in place to manage any incidents that do arise. The current situation, where many individuals are working from home, may also present increased risks. Learn more about how to respond to a cyber breach in our Pensions webinar: So you’ve had a cyber breach? What to do now.
The ICO plans to replace its existing guidance on employment practices with a new, more user-friendly online resource with topic-specific areas. The ICO is seeking input on topics and case studies to be covered in the new guidance (the existing guidance includes some pensions-related content). The consultation closes on 21 October 2021.
The ICO is consulting on proposed changes relating to international transfers of personal data, namely: updates to its guidance on international transfers; a draft transfer risk assessment and tool; and a draft international data transfer agreement (new UK-specific standard contractual clauses). The consultation closes on 7 October 2021.
The government has published a short factsheet on guaranteed minimum pensions (GMPs) and the new state pension, following issues around the communication of information about changes to payment of increases.
There is no statutory requirement for schemes to pay increases on pre-April 1988 GMPs or to provide increases on post-April 1988 GMPs above the 3% cap. However, before the introduction of the new state pension in 2016, the government effectively paid increases to individuals in respect of pre-1988 GMPs, plus ‘top up’ increases for post-1988 GMPs, via the additional state pension. This treatment changed for individuals receiving the new state pension. The factsheet states that an individual with a large GMP reaching state pension age from April 2016 to March 2017 could have a notable loss over their whole retirement.
The factsheet follows a report by the Parliamentary Ombudsman on communication about the changes, and correspondence with the Work and Pensions Committee on the issue. There have also been related complaints to schemes and the Pensions Ombudsman.
The Insolvency Service has announced that a former company director has signed an eight-year disqualification undertaking in connection with the establishment and operation of a suspected scam scheme.
The individual was a former director of Target Source Media Limited (TSM), and had established the Target Source Media Pension Scheme in 2016. In 2017, he appointed a third party to replace TSM as the trustee of the scheme, and members of the public transferred funds into the scheme. TSM was wound up in 2018.
The Insolvency Service stated that the former director had breached his duties as a company director and had demonstrated a lack of stewardship or oversight by causing or allowing the company to participate in a wider scheme involving the marketing, operation and administration of an occupational pension scheme which had failed to act in the best interests of pension scheme members, and in which their funds were jeopardised. The scheme should have been registered with TPR in accordance with the Pensions Act 2004, but was not. The director had failed to conduct sufficient due diligence to establish if the scheme trustee had the requisite skills and training, and had counter-signed payment instructions authorising the payment of significant funds from the scheme to third parties. There was no evidence that the trustee had reviewed the suitability of the investments.