Pensions: what's new this week - 5 December 2022

• Regulators’ statements on LDI
• Dashboards: consultation on design standards
• HMRC Pension Schemes Newsletter

Regulators’ statements on LDI

A number of regulators, including the Pensions Regulator (TPR), have released statements this week in relation to expectations around liability-driven investments (LDI), following market turbulence earlier this year. TPR’s statement sets out the steps that DB schemes should be taking to ensure that they have an appropriate level of resilience in leveraged LDI funds to withstand future market movements, and appropriate governance processes to be able to react quickly in stress situations. It includes a number of action points for schemes to consider.

TPR’s guidance on maintaining LDI resilience comes in response to a statement from a number of EU regulators targeted at GBP LDI funds, which indicates that the improved resilience of those funds seen since the recent market volatility, through increased liquidity buffers, should be maintained going forward. The TPR guidance sets out steps trustees should take to test that liquidity buffer in relation to their schemes’ LDI funds, and what to do where they do not have the expected level of buffer. It also sets out practical steps trustees should have in place to ensure they are able to respond appropriately to stress in the market and discussion points that schemes should raise with LDI managers. TPR also comments on issues for schemes that use the alternative of establishing a line of credit with a sponsoring employer to ensure liquidity.

The Financial Conduct Authority (FCA) published a response welcoming the above statements and noting that it has been working closely with its regulatory partners in the UK and across Europe, as well as engaging directly with firms involved in the management of LDI portfolios, to ensure they have increased resilience to deal with possible future volatility. The FCA expects that ‘all market participants should factor recent market conditions into their risk management, and should adopt a wider horizon of events that might be considered extreme but plausible. As in this event, participants should also consider the risk profile and systemic dynamics of events that could conceptually occur beyond this’.

Read TPR’s statement.
Read the EU regulators’ statement.
Read the FCA’s statement.

Dashboards: consultation on design standards

The Pensions Dashboards Programme (PDP) is consulting on draft mandatory design standards setting out requirements for the presentation of data and design of the dashboards, including messaging, signposting and onward customer journeys.

The draft standards set out in detail how Qualifying Pensions Dashboard Services (QPDS) must display pensions information to a dashboard user. The standards are also relevant for schemes, in order to understand how the underlying information they are required to provide to a QPDS is presented to users. The Financial Conduct Authority is consulting separately on parallel rules for regulated entities operating a pensions dashboard service.

The consultation closes on 16 February 2023. The PDP will be hosting webinars on 5 and 7 December to explain the recently-published dashboards standards and on 8 December to discuss the design standards. You can sign up here.

Read the consultation.

HMRC Pension Schemes Newsletter

HMRC has published Pension Schemes Newsletter 145, which includes:

• guidance on migrating schemes to the Managing Pension Schemes service;
• a reminder that schemes can no longer compile and submit new Accounting for Tax (AFT) returns for any quarter from 1 April 2020 onwards on the Pension Schemes Online service. New AFT returns from that point onwards will need to be submitted through the Managing Pension Schemes Service. Returns for Q4 2022 need to be submitted by 14 February 2023 to avoid interest and penalties;
• a request that schemes remind members who have exceeded their annual allowance for tax year 2021/22 and who do not have sufficient unused annual allowance to carry forward to cover the excess, to declare this on their Self Assessment tax return, even if the scheme is paying the tax charge; and
• information on its first public service pensions remedy newsletter, covering remedies for discrimination in public service schemes, with draft regulations and guidance for consultation.

Read the newsletter.