Here is our weekly summary of key legal and regulatory developments relevant to occupational pension schemes, which you might have missed, with links for further information.
The Pension Schemes Act 2021 (Act) became law on 11 February 2021. It brings with it many changes for trustees and employers, but also for anyone involved with the running of a defined benefit (DB) pension scheme or the restructuring of a group of companies that has ever operated a DB pension scheme. Most of the provisions will require accompanying secondary legislation and/or guidance. Draft regulations and statutory guidance relating to the climate change provisions contained in section 124 of the Act have already been published for consultation. Other regulations, such as those relating to statutory transfers, are expected to be issued for consultation in the spring, with the final form regulations to follow in the autumn. Likewise, regulations bringing into force new powers for The Pensions Regulator (TPR) are likely to be available by the autumn. For more information on the Act, see our updated communication. Alexandra Heggie also took part in last week’s 30-second #PensionsTensions video challenge on the subject of the Act.
The Pensions Administration Standards Association-led GMP Equalisation Working Group has issued a Guidance Note on Tax Issues, which examines many of the tax issues that schemes may have to address when adjusting benefits to correct for the inequalities of GMPs, and identifies possible approaches for dealing with them. Although the note considers the application and interpretation of previous HMRC guidance, HMRC has not commented on the content of the note. The note does not cover GMP conversion in detail, but the GMP Equalisation Working Group is preparing separate guidance on this topic (which is expected to cover tax considerations) and says that it is aiming to publish this guidance by the end of April 2021.
The Department for Work and Pensions is consulting on how to implement its intention to increase normal minimum pension ages under registered pension schemes from age 55 to age 57 on 6 April 2028. The consultation seeks views on a protection regime for members. It is proposed that members who have an unconditional right to draw benefits before age 57 under the scheme rules as at 11 February 2021 would be protected from the increase in 2028. It is also proposed that members would be protected from the increase if their benefits were transferred to another pension scheme as part of a block transfer (but they would lose this protection on an individual transfer). The consultation closes on 22 April 2021.
On 9 February, TPR updated its guidance on “cross border occupational pension schemes: arrangements following the end of the Brexit transition period”. While the majority of EU law affecting UK pensions law has been retained, the laws that previously governed schemes operating cross-border between the UK and EU/EEA countries have been largely revoked. If you have an affected scheme, we recommend that you take advice.
TPR has said that it will issue pension scheme returns from the middle of February. Returns must be completed and submitted on Exchange by 31 March 2021. TPR had previously said that the return would include two new questions, one requiring a link to a scheme’s published statement of investment principles (SIP) and one on the employer covenant, if TPR were able to amend its systems in time. Those questions will not appear this year, but it is worth noting that the draft regulations on climate change, if enacted, would require schemes to include in their pension scheme return a link to their published SIP, as well as to any report required to be produced under the climate change regulations.
HM Treasury issued a set of Directions on Friday 12 February disapplying, with immediate effect, The Restriction of Public Sector Exit Payments Regulations 2020 (which came into force on 4 November 2020 and are the subject of four judicial review applications due to be heard in March). Those regulations are expected to be formally revoked imminently. In the meantime, employers subject to the cap are “encouraged” to revisit any redundancies made since 4 November to remove the effect of the cap. Administrators of public sector pension schemes will need to consider how this interacts with benefits already paid, as well as amending their processes for the future. The government has announced an intention to bring forward new legislation to cap public sector exit payments “at pace”.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.