Pensions: what’s new this week 7 February 2022
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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: Dashboard developments; ‘Levelling up’: focus on pension scheme investment; TPR: climate adaptation report; Template for carbon emissions data; PPF levy ceiling order 2022/23; End of EU clearing exemption; TPO launches Pensions Dishonesty Unit; New documents for transferring data out of the UK.
- Dashboard developments
- ‘Levelling up’: focus on pension scheme investment
- TPR: climate adaptation report
- Template for carbon emissions data
- PPF levy ceiling order 2022/23
- End of EU clearing exemption
- TPO launches Pensions Dishonesty Unit
- New documents for transferring data out of the UK
The Department for Work and Pensions (DWP) has published a consultation on indicative draft regulations governing pensions dashboards. The regulations set out requirements for occupational pension schemes working with dashboards, as well as for the dashboards themselves. The consultation ends on 13 March 2022. The Financial Conduct Authority (FCA) will consult on parallel proposals for personal pension providers within the next few weeks.
The proposals envisage a ‘find and view’ functionality, despite ‘very real concerns’ with the feasibility of that approach. It is intended that users will be able to find their pensions and view information on them, including their accrued and projected values. The consultation sets out how pension schemes will be expected to provide the necessary information to facilitate this. The government may in future seek to include modelling tools and explore the potential to facilitate member-initiated transfers or consolidation.
Connection to the dashboard digital architecture will be staged, with large schemes (at least 1,000 active/deferred members) required to connect between April 2023 and September 2024 and medium schemes (100-999 active/deferred members) staging between October 2024 and October 2025. Small and micro schemes (less than 100 active/deferred members) are not covered but are expected to stage from 2026.
The regulations include ‘ambitious’ data requirements for pension schemes to protect consumers. The consultation also includes a reminder that schemes should be improving the accuracy of their data.
The Pensions Regulator (TPR) would have the ability to issue penalties of up to GBP5,000 to individuals and up to GBP50,000 in other cases, for any instance of non-compliance. This applies on a ‘per request’ basis, so a penalty can be imposed for each individual failure to comply with a person’s request for information.
The regulations give the Pensions Dashboards Programme (PDP) the power to set mandatory standards in relation to the dashboard requirements. Alongside the consultation, the PDP has published information about the scope of those standards and how they will go about setting them.
The government has published its white paper on ‘levelling up the United Kingdom’. In relation to pensions, the white paper focuses on pension funds as a source of investment to support levelling up efforts across infrastructure, housing, regeneration and SME finance. To facilitate this, the government intends to remove costs and obstacles to making long-term, illiquid investments. It highlights the recent consultation on proposals to remove certain performance fees from the scope of the charge cap that applies to default arrangements in DC schemes, noting that a response is due in the coming months.
TPR has published a climate adaptation report setting out the risks from climate change that are most relevant to occupational pension schemes and the approaches it is taking to tackle them, both as a regulator and an organisation. TPR believes that too few schemes are paying proper attention to climate-related risks and opportunities. In relation to DB schemes, TPR notes that there is limited ownership of stewardship policies and recommends that trustees sign up to the 2020 UK Stewardship Code. It states that DB trustees need to get to grips with the way climate-related risks and opportunities affect employer covenants and include climate change in their integrated risk management framework.
The Pensions and Lifetime Savings Association, Association of British Insurers and Investment Association have published a template intended to help schemes with gathering data on emissions. The template aims to provide a functional description of the data needed by schemes for reporting on emissions metrics, in compliance with TCFD requirements. The group will look at implementation experiences, additional metrics, more recent regulatory developments, and emerging best practice in the second quarter of 2022.
The latest Pension Protection Fund (PPF) order sets the levy ceiling at GBP1,178,605,581 for the year starting on 1 April 2022. This is an increase of 7.2% on last year, reflecting the increase in the general level of earnings. Previous orders have set out a compensation cap, but this is no longer included since the Court of Appeal found in PPF v Hughes that the compensation cap was discriminatory on age grounds contrary to EU law.
The European Securities and Markets Authority (ESMA) has published a letter recommending that European pension scheme arrangements should be subject to clearing requirements for over-the-counter derivatives. These arrangements are currently exempt from the requirements, but ESMA advises that this exemption should end, as it believes that pension schemes are now largely operationally ready to meet the requirements. ESMA has suggested one final extension to the exemption, to 19 June 2023, to give schemes time to prepare. The equivalent UK exemption is set to expire on 18 June 2023 (but could be extended).
The Pensions Ombudsman (TPO) has set up a pilot Pensions Dishonesty Unit to investigate allegations of serious breaches of trust, misappropriation of pension funds and dishonest or fraudulent behaviour by pension scheme trustees. The principal aim of the Pensions Dishonesty Unit is to ‘hold the wrongdoers responsible for the unlawful gains they have made and ensure they repay these monies to the scheme members’.
The Secretary of State has laid before Parliament documents for use when transferring personal data outside of the UK, to comply with data protection requirements. These documents are the international data transfer agreement, international data transfer addendum to the European Commission’s standard contractual clauses for international data transfers, and a document setting out transitional provisions. The ICO has confirmed that these documents are of immediate use to organisations transferring personal data outside of the UK, subject to the caveat that they come into force on 21 March 2022 and are awaiting Parliamentary approval. The ICO has also updated its guidance on what constitutes a restricted transfer (transfers to organisations located outside the UK).