Pensions: what’s new this week 6 December 2021
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Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.
This week we cover topics including: a consultation on proposals to remove certain performance fees from the scope of the charge cap; a DB superfund update; and updated valuation guidance from the Pension Protection Fund.
- Charge cap: government consults on performance fee changes
- TPR lists first DB superfund
- PPF update: new valuation guidance, compensation cap
- Latest HMRC newsletter
- Update: GMP conversion Bill
- FRC: review of reporting against 2020 Stewardship Code
- TPR prosecutes failure to provide information
- New FCA rules on ‘nudge’ to pensions guidance
- ICO issues fine for pensions cold calls
The government is consulting on proposals to remove certain performance fees from the scope of the charge cap that applies to default arrangements in DC schemes used for auto-enrolment.
The consultation is one of the measures aimed at facilitating access by DC schemes to a broader range of illiquid asset classes and ‘productive finance’ investments. The government is proposing to exempt ‘well-designed performance fees that are paid when an asset manager exceeds pre-determined performance targets’ from the charge cap. This exemption would not apply to fees unrelated to performance; all other investment administration charges currently in scope of the cap would remain so.
The government is seeking feedback on a number of points to help it decide whether to proceed with the proposals (and if so, how it can design the changes so that the new regime operates as intended). The consultation closes on 18 January 2022. If it decides to proceed with changes to the charge cap, the government is aiming to consult on draft regulations early next year, with the changes to come into force in October 2022.
The Pensions Regulator (TPR) has announced the first DB superfund, Clara Pensions, to be included on a list of assessed arrangements under its interim regime for superfunds. TPR has emphasised that the inclusion of a superfund on its list does not mean that a transfer to the vehicle will be given clearance.
Where a superfund appears on TPR’s list of assessed arrangements, trustees still need to carry out appropriate due diligence, and to consider whether a transfer would be in members’ best interests and would meet certain ‘gateway’ principles. TPR expects trustees and employers to notify it as soon as possible where they are considering a transfer to a superfund, and to make a clearance application. Trustees and employers considering a transfer to a superfund should seek professional advice, including legal advice, at an early stage.
The Pension Protection Fund (PPF) has published updated versions of its valuation guidance and two new information notes. It has also incorporated information on interim allowances for GMP equalisation as part of the updated section 179 valuation guidance (the PPF had previously published standalone information notes).
The new versions of the valuation guidance documents and information notes came into effect on 1 December 2021. The PPF has advised schemes and advisers in the process of carrying out valuations under an earlier version of the relevant guidance to discuss the approach with their usual PPF actuarial contact.
The PPF has also published a further update on its work to implement a court ruling that the compensation cap was unlawful, and to pay arrears to relevant pensioners. The update notes that the PPF is still considering whether it will apply a six-year time limit on arrears payments.
HMRC’s latest newsletter (no. 135) includes a request for schemes to remind members who have exceeded their annual allowance (and any carry-forward amount) to declare this on their Self Assessment tax return; an update on migration to the Managing Pension Schemes service; and information about residency status reports (for schemes operating relief at source) and accessing business tax accounts. There is also a reminder of the charge reference to use when paying Accounting for Tax return charges.
The Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill has had its Second Reading in the House of Commons. The Bill has government support and is proceeding to the next stage. The Bill aims to:
- clarify that the legislation applies to survivors as well as earners;
- provide powers to specify who must consent to the conversion and the conditions that must be met in relation to survivors’ benefits; and
- remove the requirement to notify HMRC.
The Financial Reporting Council (FRC) has published a review of reporting against the 2020 Stewardship Code, setting out examples from 2021 and expectations for 2022 – this includes several examples from pension schemes that are signatories. TPR continues to encourage trustees to sign up to the 2020 Stewardship Code.
TPR has announced a successful prosecution of a company director for failing to comply with two information-gathering notices issued under section 72 of the Pensions Act 2002. TPR had been investigating allegations that pension contributions had been deducted but not paid on behalf of former staff. The individual claimed to have provided the information but TPR said it was never received (and, in any event, it was only purportedly sent a year after it was due). The individual was convicted and ordered to pay over £80,000 (comprising a £30,000 fine for each of two offences, £22,800 in costs and a £170 surcharge).
TPR has a wide information-gathering power under section 72, and in recent years it has launched several prosecutions for non-compliance. The Pension Schemes Act 2021 granted TPR new information-gathering powers, and also introduced a new penalty regime for non-compliance (in addition to existing prosecution powers). TPR is currently consulting on draft enforcement policies covering its information-gathering powers – the consultation closes on 22 December 2021.
The Financial Conduct Authority (FCA) has published rules to implement the ‘stronger nudge’ to pensions guidance by providers of personal and stakeholder pension schemes, which will come into force on 1 June 2022.
The government has separately consulted on draft regulations to implement the ‘stronger nudge’ by trustees of occupational pension schemes. The response to this consultation has not yet been published.
The Information Commissioner’s Office (ICO) has fined a company £140,000 for instigating illegal marketing calls to people about their pensions – the ban on pensions cold calls came into effect in 2019. The ICO concluded that the company had contracted lead generators to make the calls, knowing the cold calling ban was in place, in order to try and bypass the law. There were over 107,000 illegal pension cold calls between January 2019 and September 2019 to individuals who had provided their details via competition/offer websites – the ICO was not satisfied that the company, or the lead generators making the calls, had the valid consent of those who were called, or that they had an existing client relationship with the individuals who were called.