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Pensions: what’s new this week - 8 August 2022

Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.

This week we cover topics including:  TPR updated guidance: fiduciary management and investment consultancy; TPR scams strategy; PASA guidance on value data for dashboards; CDC schemes: applications now open; Adviser negligence and breach of duty: limitation issues.

TPR updated guidance: fiduciary management and investment consultancy

The Pensions Regulator (TPR) has updated its guidance on the requirements for trustees to run a tender process when appointing fiduciary managers and to set strategic objectives for investment consultancy providers. Regulations coming into force on 1 October 2022 will largely replicate existing requirements but will move regulatory responsibility from the Competition and Markets Authority (CMA) to TPR.

Along with some general updates and clarifications, the new guidance includes: changes reflecting differences between the CMA rules and the new regulations, for example in relation to schemes with in-house or connected providers; information on transitional arrangements where actions are taken under the CMA rules before the new regulations come into force; and extra detail on tender completion notices to be provided to appointed/reappointed providers. The guidance also includes content on the inclusion of climate change and sustainability issues in the factors to be considered when assessing providers and setting objectives; and a new appendix with guidance on how schemes can use the CMA-approved Global Investment Performance Standards for assessment of fiduciary managers.

Read the updated guidance on fiduciary management tenders and investment consultant objectives.

TPR scams strategy

TPR has published a new strategy on combatting pension scams, noting that current cost of living pressures and the impact of Covid-19 is making savers particularly vulnerable. The strategy has three prongs, with actions staged over the next three years:

  • Educating savers about scams, including encouraging schemes to include anti-scam messaging on annual benefit statements and other member touchpoints; exploring how employers could promote anti‑scams messaging; encouraging industry to go beyond minimum compliance and engage savers; and encouraging schemes and employers to engage with the UK Strategy for Financial Wellbeing, which seeks to improve financial literacy.
  • Improving schemes’ practices, including encouraging all schemes to comply with the Pledge to Combat Pension Scams and Pension Scams Industry Group (PSIG) Code principles and considering making this mandatory; encouraging consolidation of poorly run schemes; exploring whether chairs of trustee boards should be professional or accredited; monitoring, updating and improving the Trustee Toolkit; and working with the biggest administrators so that they voluntarily adopt best practice on transfers.
  • Improving investigation and prosecution, including various initiatives by the Pension Scams Action Group (PSAG – the multi-agency taskforce formerly known as Project Bloom); encouraging industry to report scams to Action Fraud; exploring a regulatory sandbox to allow industry to test solutions for scam prevention and intelligence gathering; and an 18-month review of Pension Schemes Act 2021 regulations with supporting data to improve legislation where possible.

Read the strategy.

PASA guidance on value data for dashboards

The Pensions Administration Standards Association (PASA) has published guidance on the data that pension schemes will need to provide to help individuals requesting information via a pensions dashboard to understand their potential pension benefit – for example, the accrued value of a member’s pension and their estimated retirement income. The guidance includes a checklist of steps that administrators can take to understand the value data requirements, to identify any gaps and whether further information is required in final regulations before filling those gaps, and to work out how data will be obtained, calculated and stored.

Publication of the final version of the pensions dashboards regulations is expected this summer.

Read the Pensions Values guidance.

CDC schemes: applications now open

With the Code of Practice for collective defined contribution (CDC, also known as collective money purchase) schemes now in force, it is now possible to apply to open a scheme of this new type. The Department for Work and Pensions has announced plans to consult later this year on proposals to accommodate new types of CDC arrangements, including multi-employer schemes.

Read the press release.

Adviser negligence and breach of duty: limitation issues

The High Court has given an initial judgment on limitation (the time limit on when a claim can be brought) in a case involving a pension scheme adviser’s alleged negligence and breach of duty by their adviser: PSGS Trust Corp Ltd v Aon UK Ltd. The trustee and employer claim that the adviser, which provided legal, consultancy, actuarial and administrative services, failed to advise them that scheme closure and other amendments believed to have been made in 2003 and 2007 did not take effect until deeds were entered into in 2004 and 2008 respectively. The scheme was administered as if the changes were made on the earlier dates, meaning that pensions had been underpaid, resulting in an unexpected liability for the scheme.

The adviser had applied for the case to be struck out on the grounds that the mistakes were made in 2003 and 2007, beyond the limitation deadlines. The trustee and employer argued that they did not become aware of the mistake until later, and the limitation period did not begin until they had the requisite knowledge.

The judge found that the trustee and employer had an arguable case, meaning the case would not be struck out but would proceed to trial. They decided that independent advice given by other parties on some aspects of the changes (but not the ‘mechanics’) did not put the trustees on notice that there had been a mistake. Reassuringly for trustees, the judge commented that documents and advice received over time should not be treated ‘as if they were continuously present to the minds of the parties. That is not the real world, where people concentrate on documents when they need to and then forget them or recall them imperfectly’.

The judge disagreed with the trustee and employer that there was a continuing duty for the adviser to correct the problem, running until the end of its retainer. This is contrary to a recent equalisation case where a similar issue was considered (read more here); the judge found that case was not of assistance because the same arguments and case law were not raised.

Read the case.