Pensions: what's new this week - 21 August 2023
Headlines in this article
Related news and insights
Publications: 20 February 2024
Publications: 20 February 2024
Publications: 19 February 2024
Publications: 12 February 2024
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: PASA guidance on DB benefit accuracy; Dashboards: reset update; TPR’s scheme funding analysis 2023; MaPS report on pensions scams.
PASA guidance on DB benefit accuracy
The Pensions Administration Standards Association (PASA) has published guidance aimed at helping DB schemes to ensure benefit accuracy. The guidance covers:
- Benefit specifications – while these have become a key requirement before undertaking de-risking projects, the guidance suggests that they are also vital for correct administration and calculation of scheme benefits. The guidance sets out what should be included in specifications and accompanying documents. It notes that benefit specifications should be reviewed by all scheme stakeholders, including the Scheme Actuary, legal advisers and the administrator, and should be periodically reviewed to ensure they remain up-to-date. This can be documented as part of the scheme’s Data Management Plan.
- Data specifications – the guidance suggests maintaining a data specification as one way to ensure accurate and consistent record-keeping and therefore assist in the correct calculation of benefits. The specification should list key data items along with supporting descriptions and where each data item is stored on the database. The guidance gives further detail on what should be included and how these specifications should be used.
- Benefit audit – PASA highlights that undertaking a review of the accuracy of benefits put into payment is an important exercise for schemes. The guidance gives suggestions on how to complete these audits, including prioritising certain calculations, considering tolerance levels and frequency of reviews. Benefit and data audits should be performed independently, either via a third-party specialist or a separate specialist team to the day-to-day administration team. The guidance sets out a list of key things to take into account when considering this.
- Automation of calculations and processes – the guidance states that automation should be a key objective and priority, as it not only helps to manage risk, it will likely result in more efficient administration and potential cost savings over the longer term. It notes that it is important that automation is set up effectively and that thorough building, testing and sign-off procedures are in place, with ongoing review and management activities to ensure it remains fit for purpose.
Dashboards: reset update
The Pensions Dashboards Programme (PDP) has published an update on the programme’s reset. The Pensions Minister announced the reset in March 2023, alongside the deferral of the deadline for schemes to connect to the dashboards infrastructure, stating that more time was needed to deliver this. The new connection deadline is 31 October 2026. The requirement for schemes to connect by their ‘staging deadline’ has been removed from legislation and instead guidance will set out when pension providers and schemes are expected to connect to dashboards. Schemes will be required in the legislation to have regard to this guidance.
This week’s update explains that an assessment of the programme’s challenges has been completed and no major issues with the central digital architecture that sits at the core of the pensions dashboards ecosystem have been found.
The PDP will progress the draft standards for dashboards; begin development of supporting documentation and the support model for connection; and continue working with early participants on connection and testing.
TPR’s scheme funding analysis 2023
The Pensions Regulator (TPR) has published the 2023 update to its annual funding statistics for UK DB and hybrid schemes. The report shows funding trends in the context of market conditions, assumptions and scheme characteristics that impact on valuations. It also describes reported arrangements for recovery plans, employer contributions and contingent security. Key trends identified included that a significant number of schemes were in surplus on a technical provisions (TPs) basis - 38.7% of those included in the analysis; the average ratio of assets to TPs across schemes was 93.7% and the average recovery plan length for schemes in deficit was 5.7 years.
MaPS report on pensions scams
The Money and Pensions Service (MaPS) has published a report presenting the findings from a review of evidence on the scale of pension scams in the UK; the impact on those affected; types of scam and tactics used by scammers; key risk factors; and current trends. It identifies actions to combat scams, some of which could be used by pension schemes. These include increasing the prominence of the risks of a transfer in communication with pension savers; supporting pension savers to take alternative safer steps to make progress towards their financial goals; and reducing stigma by avoiding terms such as ‘victim’.