Pensions: What's new this week - 10 August 2020
10 August 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.
Covid-19: TPR blog post, PASA guidance
The Pensions Regulator (TPR) has published a new blog post on Covid-19 issues for trustees of DB pension schemes. TPR expects more Covid-related employer restructurings and insolvencies in the near term – TPR also notes that, since March, it has received 108 revised recovery plans (and in 92 of these, trustees had agreed to defer deficit repair contributions). The blog post covers many of the same points as its June guidance for DB trustees (see WNTW, 22 June 2020). It also highlights that, in restructuring situations, TPR will expect trustees to have a robust plan and to manage conflicts of interest, which may include seeking additional professional advice or trustee board appointments.
PASA has also published further Covid-19 guidance for administrators on future operating models and delivery of services. The guidance is aimed at administrators, but trustees may find it useful when reviewing service provision during the pandemic and when discussing ongoing service provision with administrators (including preparing for the risk of localised lockdowns).
TPR: new statutory employer added in settlement
TPR has published a regulatory intervention report detailing how an anti-avoidance investigation led to a charity agreeing to become a statutory employer of the NIAB pension scheme.
NIAB and NIAB Trust (a charity) were originally part of one entity which had been privatised and then, in 1998, split into NIAB and NIAB Trust. The liabilities and operations transferred to NIAB, the sole statutory employer of the scheme; NIAB Trust received valuable assets from the predecessor institution. NIAB Trust also benefitted from the use of NIAB employees to carry out activities, and intellectual property. TPR became involved when the 2015 valuation could not be agreed (as the trustees concluded the NIAB employer covenant could not support the scheme).
In June 2018, TPR began investigating if it would be appropriate to seek a Financial Support Direction (FSD) against NIAB Trust, and settlement negotiations were opened. In September 2018, TPR issued a Warning Notice seeking an FSD against NIAB Trust, to protect the scheme’s position during the negotiations. In December 2019, a settlement was agreed under which NIAB Trust became a statutory employer to the scheme.
The latest report is another example of additional financial support for a scheme being obtained by settlement, rather than the formal use of TPR’s anti-avoidance powers. It is also noteworthy that the organisational restructure took place well before the introduction of TPR’s moral hazard powers.
GMP equalisation: new PASA guidance
The PASA GMP equalisation working group has published guidance on member communications. The guidance is designed for schemes that are still in the early planning stages of their GMP equalisation projects (and are still considering their communications strategy), and includes a model Q&A for members and a checklist to track the review of scheme documents. Further guidance on communications at the implementation stage will follow.
FCA consults on property funds
The Financial Conduct Authority (FCA) is consulting on changes affecting redemption requests in certain UK authorised funds that invest directly in property (and related changes for feeder funds). The FCA’s proposals include that investors must notify fund managers in advance to redeem their investment – this is in response to concerns about liquidity mismatches, and fund managers suspending dealings where there are too many redemption requests. The FCA is concerned that the current structure could disadvantage some investors, as it incentivises investors to be the first to exit at times of stress; it also considers that notice periods have the potential to materially increase returns to investors (as funds could hold a smaller cash balance and increase investments).
The FCA is consulting on the exact notice period, but is proposing a period of between 90 and 180 days. The consultation closes on 3 November 2020. The FCA plans to publish its final policy statement and handbook rules as soon as possible in 2021.
Latest HMRC newsletter
HMRC’s latest Pension Schemes Newsletter (no. 122) contains a reminder for scheme administrators to issue, by 6 October 2020, annual allowance pension savings statements to members who exceeded the annual allowance; and to remind these members about making declarations on Self Assessment tax returns, where applicable (guidance from HMRC is available here). For schemes operating relief at source, the newsletter also contains updates about reporting excess relief and annual returns of information. It also contains a recap of other recent developments including the latest GMP equalisation guidance, the call for evidence on pensions tax relief administration, and the consultation on changes to tax legislation for collective DC schemes.
Call for evidence: small pension pots
The Work and Pensions Committee has published an open letter to the pensions industry calling for input on small DC pension pots – in particular, the Committee is looking for input on flat fee charging structures, and workable solutions to enable consolidation of very small pots. The Committee intends to consider this topic further in early 2021. The Committee’s request follows the launch of a government call for evidence on the charge cap and cost disclosure, which is due to close on 20 August 2020 (see WNTW, 29 June 2020).