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Pensions: What's new this week - 19 October 2020

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19 October 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: updated DC investment advice

The Pensions Regulator (TPR) has updated its Covid-19 DC investment guidance on the redirection of contributions into self-select funds, such as property funds, that were suspended earlier this year. The redirection of contributions could in some circumstances mean that the original fund becomes a default arrangement (which is subject to additional legal and governance requirements). TPR’s update provides additional flexibility on when a redirection can take place without triggering default status in the original self-select fund. The guidance now refers to both future contributions and assets accumulated in the alternative fund (while the original fund was gated). 

The updated guidance states that a pre-existing expression of choice could still apply (to cover the redirection) if members whose contributions have been diverted are informed that, in the trustees’ view, the pre-existing expression of choice remains in place and the members are given the opportunity to object before those contributions are redirected back into the original self-select fund. This could simplify the process for redirections (although members would be able to select an alternative fund).

Investment consultants, fiduciary management

Last year, rules from the Competition and Markets Authority (CMA) came into force which require most pension scheme trustees to set strategic objectives for investment consultancy providers and, if they use fiduciary management services, to run competitive tenders. Under this regime, affected trustees are required to submit an annual compliance statement, and signed certificate, to the CMA by 7 January 2021 (more information here). The government plans to replace the CMA regime with a different regime, but this will not be in place before the reporting deadline. 

The statement and certificate will need to be completed after the end of the annual reporting period in early December, and submitted to the CMA by the January deadline. Trustees should ensure the requirement to complete and submit the statement and certificate is noted as an action point for December. For further information on the reporting requirements, please contact your usual A&O adviser for assistance. 

Covid-19: expansion of Job Support Scheme

The government has announced an expansion of the Job Support Scheme (new factsheet here). Businesses whose premises are legally required to close under local or national restrictions (but not as a result of specific workplace outbreaks) may apply for grants to pay the wages of staff who cannot work. Further guidance is expected, but according to the factsheet:

  • Employees must be off work for a minimum of seven consecutive days.
  • The government will pay two-thirds of each employee’s ‘normal pay’ (capped at £2,100 per month) – the whole of the grant must be used to meet employee costs.
  • Employers will be required to pay national insurance and pension contributions, and may top up employee pay.
  • Employers must agree the new scheme with the relevant staff, agree any changes to the employment contract, and notify the employee in writing. The agreement must be made available to HMRC on request.
  • An employee cannot be made redundant or put on notice of redundancy during the period for which the grant is claimed for that employee.
  • The expectation is that large employers using the scheme will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the grant.
  • HMRC intends to publish the names of employers using the scheme.

The scheme will begin on 1 November and will be available for six months (with a review in January). 

PLSA report on climate-aware investing 

The Pensions and Lifetime Savings Association (PLSA) has published a new report on climate-aware investing – the report sets out a number of recommendations, and engagement action planned by the PLSA, aimed at overcoming obstacles including poor quality data and structural challenges in the investment chain.

These include: recommending a joint industry/government review aimed at clarifying definitions of climate-aware investment; encouraging the government and regulators to move towards more widespread adoption of TCFD recommendations and other changes; supporting the creation of a new Sustainability Standards Board; and working on new guidance for schemes and members. 

TPR: consultation on new corporate strategy

TPR has launched a consultation on its proposed corporate strategy for the next 15 years – this has been expected for some time, and it outlines how TPR’s focus will be on savers (not schemes) and will shift, over time, from DB to DC saving. 

The strategy considers various generations (Baby Boomer, Generation X, Millennial, Generation Z), setting out TPR’s analysis of key risks and opportunities, and areas of focus. It also discusses how TPR expects the pensions savings landscape to evolve over the next 15 years, and lists five strategic goals. These are: savers’ money is secure; savers get good value for their money; decisions made on behalf of savers are made in their best interests; the market innovates to meet savers’ needs; and TPR is a bold and effective regulator.

TPR is seeking overall feedback on the strategy as well as responses to specific questions. The deadline for responses is 16 December 2020, and TPR expects to publish its finalised strategy in the new year. The press release is available here.

PLSA report on DC decumulation

The PLSA has published its recommendations for a new DC decumulation framework, following a call for evidence over the summer. 

The PLSA is recommending a new regulatory regime requiring schemes to provide support that meets minimum standards on member engagement and communications, the provision or signposting of decumulation products, and processes relating to the design and/or selection and ongoing delivery of these products. 

Reminder: member reassurance on Covid-19 

Six industry bodies – TPR, the Pension Protection Fund (PPF), the Financial Conduct Authority, the Financial Services Compensation Scheme (FSCS), the Money and Pensions Service and the Pensions Ombudsman – published a booklet earlier this year to provide reassurance and guidance for members. The PPF has issued a reminder about the guide, which covers questions such as what happens to pensions contributions for furloughed members, how to protect themselves from scams, how the Ombudsman can help, and what protection is provided by the PPF and the FSCS. Schemes may find this a useful resource to offer to members.