Here is our brief weekly summary of key legal and regulatory developments relevant to occupational pension schemes, which you might have missed, with links for further information.
- The Pensions Regulator (TPR) has relaxed its enforcement rules and reporting guidelines for trustees due to COVID-19. Broadly, TPR says that if a breach will be rectified in a short timeframe (not more than three months) and does not have a negative impact on members, trustees do not need to report to TPR, but should keep records of decisions made and actions taken. The guidance expands on areas such as late payment of employer contributions (which are considered to be material after 150 days rather than 90 days), annual benefit statements, transfers and scheme accounts. The reporting relaxation does not apply to everything – e.g. requirements are unchanged for notifiable events and the chair’s statement. The easements will be in place until 30 June 2020 and are subject to review.
- More information has been published on the Coronavirus Job Retention Scheme. HMRC has updated its guidance for employers and employees, and TPR has issued guidance on automatic enrolment and pension contributions. We commented on the changes in two blogs, the most recent blog can be accessed here. The guidance contains a lot of new information but the main headlines are set out below:
- An employer can claim a grant from HMRC to cover 80% of a furloughed employee’s wages (capped at £2,500) plus “minimum automatic enrolment employer pension contributions” and employer National Insurance Contributions on the subsidised wage. The maximum amount of “minimum automatic enrolment employer pension contributions” that the employer can claim from HMRC is calculated by reference to 3% of qualifying earnings. Employers who calculate automatic enrolment employer pension contributions on a different basis will need to undertake separate calculations to work out their claim.
- Subject to a number of conditions, TPR has confirmed that it will not currently take regulatory action if a struggling employer reduces its defined contribution (DC) pension contributions for furloughed staff, but fails to consult employees for the required 60-day period.
- Benefits provided through salary sacrifice schemes (including pension contributions) that reduce the employee’s taxable pay should not be included in the reference salary used to calculate the wages that will be covered by the HMRC grant. In other words, the 80% is applied to the post-reduction salary figure.
Additional answers to technical questions are likely to emerge over the coming days and weeks.
- The Financial Conduct Authority has issued guidance for financial advisers whose clients are considering a defined benefit to DC transfer during the COVID-19 pandemic. Where a client is seeking to transfer because they feel that their employer is likely to fail during the pandemic and that their pension would be safer in a DC arrangement, advisers are reminded that they are not usually experts in employer covenant assessments, and that they should instead provide a fair assessment of the benefits of the Pension Protection Fund.
- We are receiving a lot of enquiries about trustee decision making and virtual execution of documents during periods of social distancing and lockdown. Trustees should check their trust deed and rules (or articles of association in the case of a sole corporate trustee) to assess their options. Can meetings be held by telephone conference or video conference? What are the quorum requirements? Do trustees have a plan to ensure that a quorum will be possible for decision making? Do all trustees have access to a printer and scanner, or if not, is a contingency plan in place for the execution of documents? How should original deeds be treated? For the execution of deeds, a witness to a signature must be physically present and must sign (electronically or otherwise) the same document as the party whose signature they are attesting.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.
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