Pensions: what’s new this week - 4 July 2022
04 July 2022
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: DWP: new dashboards consultation, HMRC Pension Schemes Newsletter with GMP equalisation guidance, PASA GMP equalisation guidance, Guide on considering ESG in the employer covenant process, Embedding stewardship: new report, Dormant assets – authorised payments regulations.
- DWP: new dashboards consultation
- HMRC Pension Schemes Newsletter with GMP equalisation guidance
- PASA GMP equalisation guidance
- Guide on considering ESG in the employer covenant process
- Embedding stewardship: new report
- Dormant assets – authorised payments regulations
The Department for Work and Pensions (DWP) is consulting on two additional aspects of the pensions dashboards regulations that were not included in the initial consultation published in January. These are:
- provisions on the Dashboards Available Point (DAP): this is the date on which the dashboards will become available to the public. The proposed provisions give the Secretary of State the power to set the DAP, with at least 90 days’ notice. The Secretary of State must be satisfied that the dashboard ecosystem is ready to support the widespread use of qualifying pensions dashboard services. This includes consulting with the Money and Pensions Service (MaPS), the Pensions Regulator (TPR) and the Financial Conduct Authority (FCA), as well as having regard to matters such as security and conformance testing; and
- powers to allow MaPS and TPR to share information with each other to facilitate their respective roles in relation to the dashboards.
The consultation closes on 19 July 2022.
HMRC has published Pension Schemes Newsletter 140, which includes guidance on payment of interest on pension scheme arrears where a pension has been underpaid because it did not account for GMP equalisation. This confirms the position disseminated via industry bodies in April this year; interest payments will qualify as scheme administration member payments (meaning they will be authorised payments for tax purposes) where interest is provided on an arm’s length commercial basis. This will be the case where interest is paid at 1% above base rate (in line with the Lloyds judgment on GMP equalisation) either on a simple or compound basis, or at an interest rate specified in the scheme rules. Interest payments are taxable in the tax year in which they are paid and the newsletter includes guidance on when tax must be deducted at source (this is not usually the case where the payment is made by scheme trustees or their administrator unless the person lives outside the UK).
The newsletter also includes updates on migration to the Managing Pension Schemes Service and the following deadline reminders:
- 14 August 2022 is the deadline for migrating a scheme to the Managing Pension Schemes service in order to submit Accounting for Tax returns for Q2 2022; and
- for reporting tax charges on the Accounting for Tax (AFT) return, normal reporting deadlines apply, unless the notice is received after 31 December in the year following that in which that tax year ended. If the deadline has passed, schemes should report the charge on the next quarter’s AFT return. Normal reporting deadlines apply for event reports, and schemes should report the issue of pension savings statements by 31 January following the tax year to which the report relates. This clarifies information previously included in Newsletter 138.
The Pensions Administration Standards Association (PASA) has published guidance for administrators on dealing with GMP equalisation for past transfers out. The guidance sets out a checklist of issues, the trustee decisions needed in relation to those issues and the administration implications.
Accounting For Sustainability and the Employer Covenant Practitioners Association have produced a guide for trustees setting out ‘top tips’ for considering ESG risks and opportunities as part of the employer covenant process. It is targeted at trustees of DB schemes and sets out six areas to consider: identifying the relevant time horizon; broadening understanding of sponsor-related ESG risks and opportunities; gathering relevant data and information and engaging the scheme sponsor and peers; leveraging expert advice to assess potential impact; undertaking evidence-based discussions with the sponsor and understanding how material risks will be mitigated; and measuring, monitoring and reassessing.
A joint steering group established by the Investment Association and the Pensions and Lifetime Savings Association has published a report making recommendations for embedding stewardship into each stage of the relationship between investment managers and pension funds (pre-appointment, manager selection, the contractual relationship and ongoing oversight) and aligning stewardship expectations.
Regulations will come into effect on 1 August 2022 providing that a transfer of pension benefits under the Dormant Assets Act 2022 will be an authorised member payment. The 2022 Act extended the Dormant Assets Scheme (DAS) to include some insurance and pension products, including regulated money purchase personal pension schemes, meaning that assets that have not been claimed can be transferred and used for good causes. The latest regulations allow dormant assets to be transferred into a reclaim fund without incurring unauthorised payments charges.