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Pensions: what’s new this week - 6 July 2020

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06 July 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. Listen to our latest podcast or read the full version of 'What's new this week' below to find out more information on the stories that matter to you.

Covid-19: updated DC investment advice

Where self-select funds have been suspended (or ʽgatedʼ) due to the effects of the pandemic and contributions are redirected into an alternative fund (commonly a cash fund), this is likely to mean that the alternative fund is now categorised as a default arrangement and is subject to additional legal and governance requirements. Last week we reported on confirmation received from the Pensions Regulator (TPR) that, after gating ends, an automatic redirection of future contributions back to the original fund may trigger default status for that fund (even though it was previously expressly chosen by the member).

TPR has now updated its Covid-19 DC investment guidance to address this issue. The guidance now states that:

  • The pre-existing expression of choice will probably still apply if members have either (a) consented to the redirection of the contributions on a temporary basis, until the original fund ceases to be gated; or (b) been informed by the trustees that the redirection was being made and would be corrected as soon as the original fund reopens.
  • If the pre-existing expression of choice no longer applies and contributions are directed back to the original fund without a new expression of choice, the original fund would be a default arrangement.

Please contact your usual A&O adviser for further advice.

Pension Schemes Bill 

Several amendments were made to the Pension Schemes Bill at Report stage in the House of Lords, including government amendments to the provisions on trustee governance and disclosure duties in relation to climate change risk, and on statutory transfer rights. 

Conditions were also imposed on the use of regulation-making powers in relation to the funding and investment strategy and statement of strategy – this was in response to concerns about the potential implications for open DB schemes. Other changes were made to the Bill in relation to collective DC schemes and pensions dashboards.

You can find out more about the Bill and its implications for schemes and sponsors in our webinar ‘Pension Schemes Bill: hazard warning?’, and our legal update webinar, at 8.30-9.30am on 8 and 10 July, respectively (click here to register).

DB funding analysis

TPR has published its analysis of the expected positions of DB pension schemes with valuation dates between 22 September 2019 and 21 September 2020 (Tranche 15), following its Annual Funding Statement. This suggests that many schemes are likely to have larger deficits than at their previous valuation date (especially schemes with valuation dates in March and April 2020), subject to scheme-specific circumstances and assumptions and data quality. 

TPR expects that some trustees will need to make changes to their recovery plan to reflect changes in their scheme’s funding level and in the affordability of deficit reduction contributions.

TPR, PPF guidance on moratoriums, restructuring plan 

The Corporate Insolvency and Governance Act contains new measures for struggling businesses including moratorium and restructuring plan options. Last minute changes in Parliament also introduced requirements to notify TPR and the Pension Protection Fund (PPF) – you can read more about key implications of the Act here and here.

TPR has now published guidance on moratoriums covering notifications to TPR. Guidance on submitting information to the Pension Protection Fund is available here.

Covid-19: new CJRS direction published

The government has published a new Direction modifying the operation of the Coronavirus Job Retention Scheme (CJRS). As well as making provision for ‘flexible furlough’ between July and October, the direction also makes some modifications to the earlier directions (TPR guidance on ‘flexible furlough’ is available here)

TPR publishes Corporate Plan

TPR has published its Corporate Plan 2020-21, which sets out TPR’s key priorities for the coming year. The Plan also provides an update on ongoing projects that were paused or delayed as a result of Covid-19 – this includes TPR’s single Code of Practice consultation, which is now expected towards the end of the year, as well as projects on TKU and ESG issues.