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Pensions: What's new this week - 7 December 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. 

Pension scams: clarification on TPR scams pledge, transfers to ‘international SIPPs’

Scams pledge

Recently we reported on a new pension scams campaign by the Pensions Regulator (TPR), including a request for trustees and administrators to pledge their commitment to protecting members from scams (including warning members and conducting appropriate due diligence). In correspondence with TPR, we have obtained the following clarifications on the pledge:

  • TPR is encouraging third party administrators (TPAs) to engage with the pledge and to discuss actions with schemes – once this is done, schemes and TPAs can self-certify they meet the pledge. TPR has acknowledged that this may take longer for some schemes and TPAs than others.
  • Clearly, many schemes have a pre-existing and ongoing commitment to combatting scams (and have been working hard on this for a number of years, so signing the pledge would not be a ‘new’ commitment in that regard). TPR currently has no plans to publish the list of those who have signed up, but may look to do this in future (it views the pledge as a public commitment) and has confirmed that, if it does so, it would aim to demonstrate that schemes are continuing to put their members first by signing the pledge, and by ensuring they meet TPR’s expectations.
  • The current form asks for the scheme name, so trustees/administrators of multiple schemes would need to sign up for each individual scheme.

International SIPPs

The Financial Conduct Authority (FCA) has published an announcement warning individuals about transferring or switching UK pensions into international self-invested personal pensions (‘international SIPPs’). The FCA is concerned that individuals who invest in this way may be exposed to high and/or unnecessary charges, and that the tax benefits of investing through an offshore investment bond are largely redundant to someone investing in a UK personal pension scheme. It recommends that DB scheme members who are considering such a transfer should contact The Pensions Advisory Service before taking any further action.

The industry Code of Practice on pension scams already highlights that international SIPPs are a vehicle that may be used by pension scammers. Trustees and administrators should draw a member’s attention to this announcement, as part of their processes when a member is requesting a transfer of this type.

Stewardship: new working group, plans for central directory of SIPs

The Pensions Minister has announced the creation of a new working group to address barriers to investment stewardship by trustees (and, in particular, the exercise of voting rights where trustees invest in pooled funds). The exact terms of reference for the Taskforce on Pension Scheme Voting Implementation have not yet been
published, but the intention is that it will work on:

  • driving solutions to voting system issues;
  • increasing the number of asset managers who are prepared to engage with their clients’ preferences and follow or as a minimum ‘align or explain’ on trustee voting policies (including via pooled funds);
  • recommending regulatory and non-regulatory measures to ensure the convergence of asset managers’ approaches to voting policy and execution with trustees’ policies and preferences (especially in pooled arrangements);
  • supporting and advising on the development of voting policies for occupational pension schemes; and
  • proposals for better disclosure of votes in a standardised and comparable way.

The Minister also announced that he was taking forward a proposal for a central directory of statements of investment principles (SIPs).

Latest HMRC newsletter

HMRC’s latest Pension Schemes Newsletter (no. 126) contains a statement of HMRC’s position on ‘in specie’ contributions following the HMRC v Sippchoice decision (WNTW, 18 May 2020). HMRC has updated its ‘Giving effect to cash contributions’ guidance to clarify its approach to pension contributions made pursuant to a contractual offset agreement, and has also made a related update to its guidance on asset-backed contribution arrangements.

The newsletter also contains: updates on the migration from Pensions Schemes Online to the Managing Pension Schemes service and on HMRC’s ongoing work on user credentials; information for schemes using relief at source; a request for schemes to remind members who have exceeded their annual allowance (and any carryforward amount) to declare this on their Self Assessment tax return; and a reminder that, in light of the Covid-19 pandemic, HMRC will not be issuing any notices to file pension scheme returns for 2019 to 2020.

Purple Book 2020

The Pension Protection Fund (PPF) has published the 2020 edition of the Purple Book, which contains its assessment of the risk profile of UK defined benefit schemes. The data indicates a deterioration in the net funding position and aggregate s179 funding ratio of schemes (the decrease in the aggregate funding ratio was primarily due to market movements), and a continued trend for de-risking assets, as schemes continue to move investment allocations away from equities to bonds. There was a significant increase in the total value of risk transfer deals in the year to 30 June 2020, compared to the previous year; the PPF also notes a slight reduction in the number of PPF-certified contingent assets.

Court of Appeal: legal principles for transfers of insurance business

The Court of Appeal has upheld appeals against a decision by the High Court to refuse to sanction the transfer of a portfolio of annuities from the Prudential Life Assurance Company to Rothesay Life Plc under the provisions of the Financial Services and Markets Act 2000. The matter will now be reconsidered by the High Court. You can read more about the decision here.

Pensions Academy webinars now online

Recordings of our November 2020 Pensions Academy webinars are now available online: click here to watch.

As a reminder, the programme covered: how to respond well when a cyber breach occurs; the ESG/sustainability horizon for pension schemes; and a round-up of legal developments expected in 2021.