Pensions: what’s new this week - 8 June 2020
08 June 2020
Welcome to your weekly update from the Allen & Overy Pensions team, bringing you up to speed on all the latest legal and regulatory developments in the world of occupational pensions.
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Covid-19: changes to the CJRS
The government has announced details of how the Coronavirus Job Retention Scheme (CJRS) will operate over the coming months, with the phasing out of government support and the introduction of ‘flexible furlough’ (meaning an employee may work for part of the week, and be covered by the furlough scheme for other days):
- In June and July, the government will pay the existing level of support (80% of wages subject to the cap, and support for employer national insurance contributions (NICs) and pension contributions). From 1 July, flexible furlough will be available.
- In August, the government will pay the existing level of support towards wages but employers will no longer be able to claim under the CJRS for employer NICs and pension contributions.
- In September, the government will pay 70% of wages (up to a cap of £2,187.50) for the hours the employee is furloughed. Employers will pay the remaining 10% (so that maximum furlough pay remains at £2,500).
- In October, the government will pay 60% of wages (up to a cap of £1,875) for the hours the employee is furloughed. Employers will pay the remaining 20% (so that maximum furlough pay remains at £2,500).
Where flexible furlough is used, this could add complexity around issues such as pensionable pay definitions, applicable contribution rates, salary sacrifice, and the monitoring of whether correct contributions have been paid to the scheme. You can read more about upcoming changes in this briefing by our Employment team. Further information on the measures is expected this week, following which employers and trustees should consider and seek advice on the implications as appropriate.
Covid-19: new guidance on pension scheme accounts
New guidance has been published for pension scheme auditors on annual reports and financial statements, and related matters in the context of Covid-19.
Annual reports, including audited financial statements, must be produced within seven months of the scheme year end. The guidance includes content on the ‘going concern’ assessment for different types of scheme, and on narrative elements of the report and assessing fair value, in light of Covid-19. It also notes that, for pension schemes with accounting periods ending on 31 December 2019, the Covid-19 pandemic is likely to be considered a non-adjusting event (meaning that it is indicative of conditions that arose after the reporting period, requiring disclosure rather than adjustments).
The additional complexity of reporting due to these issues may mean that increased time is required to finalise the process. The guidance also notes the need for auditors to state whether in their opinion contributions have been paid in accordance with the schedule of contributions or payment schedule, and that this may be made more complex due to the suspension or reduction of deficit reduction contributions, changes in pensionable earnings or the furloughing of employees.
The guidance has been published by the Institute of Chartered Accountants of Scotland, the Institute of Chartered Accountants in England and Wales and the Pensions Research Accountants Group, but does not form part of the Pensions SORP and has not been reviewed by the FRC. However, trustees may find it useful when preparing the annual report.
Corporate Insolvency and Governance Bill
The Corporate Insolvency and Governance Bill has completed its passage through the House of Commons and will now be considered by the House of Lords. As a reminder, the Bill contains a number of measures including:
- provisions limiting directors’ liability for wrongful trading, but these do not amend the requirement to notify TPR under the notifiable events regime where the employer has received advice that it is trading wrongfully, or where a director knows that there is no reasonable prospect that the company will avoid going into insolvent liquidation. Where this advice is given or the relevant knowledge has arisen, this would still trigger a requirement for the sponsor to notify TPR; and
- a moratorium for a company (subject to eligibility criteria), including a payment holiday on certain debts. The Bill also contains provisions affecting the priority of creditors where a company enters winding up proceedings within 12 weeks of the end of a moratorium.
You can read more about the Bill in this briefing from our Restructuring team.
Investment consultants, fiduciary management
Last year, rules from the Competition and Markets Authority (CMA) came into force requiring pension scheme trustees to run competitive tenders for fiduciary management services and to set strategic objectives for investment consultancy providers. Under the CMA regime, trustees are required to submit an annual compliance statement to the CMA – the government intended to replace the CMA rules with new pensions regulations under which trustees would be required to report to TPR via the scheme return, but the regulations have been delayed and the timing is unclear.
The CMA has now published information on the submission of compliance statements (including the email address for submission). For pension scheme trustees, the deadline is 7 January 2021. If the CMA regime is not superseded, trustees will be required to use this process to report compliance.
You can read more about this issue in our briefing ‘ESG for pension schemes: now and next’.
Other Covid-19 updates
In other Covid-19 updates, HMRC has extended an easement allowing recently retired public sector workers to return to work in response to the Covid-19 outbreak without losing their protected pension age (see WNTW, 4 May 2020).