Pensions: What's new this week - 28 September 2020
28 September 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.
Covid-19: new Job Support Scheme announced
The government has announced a new Job Support Scheme intended to support businesses to retain staff on reduced hours rather than making them redundant. The scheme will run for six months beginning on 1 November. Further guidance is expected shortly, but a factsheet provides some high-level information, including:
- Employees must work at least 1/3 of normal hours and be paid for that work as normal by the employer – after three months, the government will consider whether to increase the 1/3 threshold. The government and the employer will each pay for 1/3 of the hours not worked (the government expects that wages will not be ‘topped up’ beyond this). The government’s contribution will be capped at GBP697.92 per month.
- Employees may cycle on and off the scheme, but each short-term working arrangement must cover a minimum of seven days.
- Large employers will have to undergo a financial assessment test to demonstrate reduced turnover and will be expected not to make any capital distributions. There will be no financial assessment test for small and medium enterprises.
- The grant does not cover national insurance or pension contributions, which will have to be paid in addition by the employer.
- Employees cannot be made redundant or put on notice of redundancy during the period in which the grant is being claimed.
- Employers must agree the new arrangements with staff. Changes to the employment contract must be agreed and documented.
The full detail of the scheme is not yet known, but if an employer plans to participate, the interaction with scheme rules is likely to be complex. For example, definitions of pay and part-time employment should be considered, together with the impact on contingent benefits such as life cover and the implications for auto-enrolment contributions. Contact your usual A&O adviser for assistance.
Implementation statements; PLSA reporting templates
The new implementation statement requirement applies from 1 October 2020 onwards (the timing for each scheme will depend on the timing of publication of the annual report). The precise content requirements for the statement differ between DC/hybrid schemes and pure DB schemes, at a scheme level (so, for example, a scheme that has both DB and DC sections must comply with the more detailed requirements applicable to DC/hybrid schemes across both sections). You can read more on this in our briefing ‘The implementation statement: how to prepare for it’.
The implementation statement for each scheme must set out how trustees have put into practice certain matters set out in their statement of investment principles, including stewardship and engagement activities. To help trustees obtain and disclose this information, and to support consistency of reporting, the Pensions and Lifetime Savings Association (PLSA) has now published Vote Reporting Templates for pension schemes and asset managers (click here to read the press release).
Pension Schemes Bill update
The Pension Schemes Bill will have its second reading in the House of Commons on 7 October. The Pensions Minister expects the Bill to receive Royal Assent by the end of the year.
Auto-enrolment: alternative quality requirements
The government has launched a call for evidence on the alternative quality requirements for DB and hybrid schemes used for auto-enrolment, seeking responses to three questions:
- Are the alternative quality requirements for DB and hybrid schemes continuing to deliver the intended simplifications and flexibility for sponsoring employers and pension schemes that are unable to use the test scheme standards?
- Who is carrying out the tests: the employer (using self-certification) or its professional advisers?
- Are there any unforeseen issues about the operation of the alternative quality requirements, when compared to the test scheme standards?
The government is required to carry out a review of these provisions at least every three years (the initial review was in 2017). The government has indicated that it will publish its response to the 2017 review as part of the response to this exercise. The call for evidence closes on 21 October 2020.
State pension up-rating: new Bill
A new government Bill has been introduced in the House of Commons to provide for increases to certain social security benefits in the 2021-22 tax year, including state pensions. The government has stated that this is due to the impact of the Covid-19 pandemic on the earnings measure used to calculate the up-rating of these benefits, and that the Bill has been introduced to maintain its commitment to the ‘triple lock’ on the state pension. The government intends to ask Parliament to expedite the parliamentary progress of this Bill, so that it can become law by mid-November.
Small pension pots: new working group
The government has launched an industry working group to assess and make recommendations, as an interim step, on tackling the accumulation of deferred, small pension pots. Previous plans to address this issue (‘pot follows member’) were put on hold in 2015. The working group will report later this autumn with an initial assessment, recommendations and an indicative roadmap of actions.