Pensions: What's new this week - 26 October 2020
26 October 2020
Each week the Allen & Overy Pensions team, rounds up the latest legal and regulatory developments in the world of occupational pensions. Contact us if you would like to receive our podcast summary, or our full briefing by email, at the start of each week.
Read the latest edition of 'What's new this week' below to find out more information on the stories that matter to you.
TPR publishes new superfunds guidance
The Pensions Regulator (TPR) has published new guidance for trustees and employers considering a transfer to a DB superfund, plus information on the current assessment process, a press release, a blog post and an infographic. TPR will shortly publish a list of superfunds.
This follows earlier guidance for those running superfunds, on the standards TPR expects to be met before the government implements a new legislative authorisation framework (WNTW, 22 June 2020). The government is planning to introduce a Bill to Parliament, but the exact timing is not yet known.
The guidance sets out a number of expectations for both trustees and employers - these include engagement with TPR by trustees and employers from an early stage, an application for clearance in relation to any proposed transfer, and appropriate due diligence to be carried out by trustees. Ultimately, TPR expects employers and trustees to demonstrate why they believe the transaction is in the best interest of members, and how it meets the following 'gateway principles'.
- A transfer to a superfund should only be considered if the scheme cannot afford to buy out now.
- A transfer to a superfund should only be considered if a scheme has no realistic prospect of buy-out in the foreseeable future, given potential employer cash contributions and employer insolvency risk.
- A transfer to the chosen superfund must improve the likelihood of members receiving full benefits.
There is also specific guidance covering: transfers where there is no immediate severance of the employer convenant; transfers by schemes exiting a PPF assessment period; and partial transfers (in respect of a specific group of members).
Trustees and employers considering a transfer to a superfund should review the guidance and seek professional advice, including legal advice, at an early stage.
Covid-19: Government announces further changes to Job Support Scheme
As a reminder, the government previously announced two elements of the scheme: the 'JSS open' (intended to support businesses to retain staff on reduced hours) and the 'JSS closed' (for businesses required to close under local or national restrictions). Neither of these includes a grant for pension contributions.
The government has now announced a further package of measures, including changes to the JSS Open. Under the changes to the scheme, the hours an employee is required to work are reduced from 33% of normal hours to 20%, and the employer contribution to wages is reduced to 5% of reference salary (capped at GBP125 per month). The government will pay 61.67% of reference salary for the hours not worked (capped at GBP1,541.75 per month).
HMRC's latest guidance contains further guidance on the eligibility criteria for the JSS, including the Financial Impact Test for JSS Open for large employers (those with 250 or more employees on payroll on 23 September). The government expects that large employers and their corporate groups using the scheme will not make capital distributions whilst claiming JSS grants – the guidance states that it 'does not plan to make this expectation a contractual or legal condition of the scheme but encourages business[es] to reflect on their responsibilities and that taxpayers should be able to rely on public money only being claimed where it is clearly needed.'
The guidance also notes that employers must have paid the full amount claimed for an employee's wages to the employee before each claim is made, and cannot enter into any commitment or transaction with the employee which would reduce wages below the amount claimed (for example, via a salary sacrifice scheme). However, some authorised deductions from net salary (including pension contributions) may continue while an employee is working reduced hours.
If an employer plans to participate in the JSS, the interaction with scheme rules (for example, the definition of pensionable pay and the operation of part-time working rules) may be complex. Please contact your usual A&O adviser for assistance.
Government responds to consultation on annual benefit statements
The government has published its response to its consultation on simpler annual benefit statements.
The government has decided to mandate simpler statement templates for DC schemes used for auto-enrolment - it will continue to work with stakeholders on a template and will consult further later this year. However, the government considers that it would not be appropriate to include detailed information on costs and charges in the template, and instead proposes that the statement includes a sentence signposting where this information is available. The government also plans to consult at a later date on mandating the timing of annual benefit statements ('a statement season'). The government is beginning by rolling out changes for DC auto-enrolment schemes, but its long-term ambition is to improve consistency across all schemes - it will evaluate the impact of these changes before consulting on how a similar approach for all remaining schemes could be delivered.
Data breach: ICO announces GBP20 million fine
The Information Commissioner's Office (ICO) has issued a final penalty notice for GBP20 million against British Airways (BA) in relation to a data breach in 2018 (where the attacker is believed to have potentially accessed the personal data of over 400,000 individuals). The ICO had earlier proposed to to fine BA over GBP183 million in relation to the data breach, but took into account mitigating factors including the remedial measures implemented by BA, its prompt notification to the ICO and affected data subjects about the attack and its cooperation with the investigation. The ICO also considered the impact of the pandemic in reaching its final decision on the appropriate penalty.
On 23 November, our Pensions Academy webinar 'So you've had a cyber breach? What to do now' will cover readiness for responding to a cyber attack. See the final item below for more information.
ICO: new guidance on subject access requests
The guidance covers a wide range of issues, with a number of illustrative examples, including what is the right of access, what to consider when responding to a request, and when you can refuse to comply with a SAR. It notes that data controllers, not processors, are responsible for complying with SARs - contractual arrangements with processors should ensure that data controllers can deal with SARs properly, irrespective of whether these are sent to the data controller or the processor, and should clearly state that the processor must help controllers meet their obligations for SARs (guidance on contracts is available here). The data controller remains responsible for some matters (including deciding whether individuals need to provide clarification, or if a request is manifestly excessive).
Trustees and administrators should familiarise themselves with the new guidance, and seek advice as appropriate.
APPT: new code of practice for sole trustees
The Association of Professional Pension Trustees (APPT) has published a new, voluntary, code of practice, developed in consultation with TPR, for professional trustee firms carrying out sole trusteeships.
Pensions Academy Online: week commencing 23 November
Our next Pensions Academy sessions will take place online at 9.30 - 10.30am on the following dates:
- 23 November - So you've had a cyber breach? What to do now
You can't completely eliminate the risk of a cyber breach, but how you act in the immediate aftermath of one may have a significant impact on how much damage is done and how quickly you recover. It's also increasingly seen as an important aspect of good governance. Our experts will talk you through how to be ready to respond well to a cyber attack.
- 25 November - Pension schemes and the sustainability horizon
The ESG agenda for pension schemes has moved on significantly in the last few years, but there's much further to go and the speed of travel is increasing. With major new monitoring and reporting requirements on the way in relation to climate change and wider sustainability issues, as well as increased governance requirements, we'll show you the bigger picture of how sustainable investment is developing and help you to develop a framework for thinking about the new requirements.
- 27 November - Legal update
2021 is shaping up to be a year of change, with significant legal developments for pension schemes on the horizon. We'll help you to shape your agenda for what's ahead.
Register here for any of these webinars.