Pensions: what’s new this week - 16 January 2023
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Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.
This week we cover topics including: TPR: DC guidance on current economic situation; TPR: updates to transfers guidance; PPF: updated buy-out assumptions; PASA: dashboards guidance for master trusts.
- TPR: DC guidance on current economic situation
- TPR: updates to transfers guidance
- PPF: updated buy-out assumptions
- PASA: dashboards guidance for master trusts
The Pensions Regulator (TPR) has issued a guidance statement for trustees on steps they should be taking in light of the impact of the current economic climate (volatility in equities, falling bond values and increases in inflation and interest rates) on DC members. The guidance deals with supporting members, strengthening governance and oversight, and ensuring investment strategies support stronger saver outcomes. Many of the key messages are taken from TPR’s existing DC Code of Practice and related guidance but with additional detail relevant to the current situation.
Key actions for trustees from the guidance include:
- review member characteristics and analyse changes in behaviour to improve member outcomes;
- monitor fund performance and how it is impacting different groups of members;
- review how investments withstand higher inflation and ensure members understand the risk of, for example, choosing cash investments which will be eroded by inflation;
- review member communications, ensuring members have enough information to make informed decisions about their savings and understand how market changes affect their savings;
- review the support being given to members when taking decisions and warn members against taking hasty decisions and of the risk of scams; encourage them to seek advice; and
- consider providing additional information alongside or in advance of annual benefit statements (the guidance sets out areas that may be covered by this).
The guidance sets out a further checklist to help schemes develop their own action plans. It also suggests some higher-level points for consideration – for example, TPR comments that trustees may wish to ask their investment adviser to carry out a strategy review to ensure the default and self-select investment arrangements and the outcome they are targeting remain suitable.
TPR has made changes to its guidance on dealing with transfer requests to help schemes direct members to the correct advice to comply with transfer requirements. Schemes are required to direct members to MoneyHelper for safeguarding advice where an ‘amber flag’ is identified in relation to their transfer request. The updates to the guidance highlight the importance of appointments being booked through the correct link, to avoid the member accidentally booking a different type of appointment, which would not satisfy the requirement. It also now notes that schemes should provide the relevant link immediately after completing due diligence to avoid unnecessary delay in processing transfers, and should advise members consolidating more than one pension to wait until they have requested all transfers before booking, to avoid them being asked to attend more than one appointment.
The Pension Protection Fund (PPF) has launched a consultation on changes to the assumptions used when valuing a scheme after an employer has entered insolvency. The valuations are used to determine whether the scheme enters the PPF or can secure higher benefits through the insurance market. The proposals are intended to make the PPF’s valuations better reflect the assumptions used by insurers. The changes include: adopting a yield curve approach to determining liabilities in some circumstances; increasing the discount rates for certain tranches of benefit; a new model for mortality projections; and amending the calculation of expenses. The consultation closes on 20 February 2023 and the changes are proposed to take effect for valuations with an effective date on or after 1 April 2023.
The Pensions Administration Standards Association (PASA) has published guidance aimed at helping master trusts meet their pensions dashboards requirements. The guidance sets out key actions and decisions needed in relation to: (i) data, including data accuracy, validation, cleansing, matching and usage; (ii) technical considerations and the dashboards ecosystem; and (iii) legal requirements and compliance, including the interaction with data protection and cyber-security requirements. It includes practical points on master-trust specific issues such as how to deal with schemes transitioning to a master trust, and sets out a ‘Top 10 actions’ project plan.