Pensions Weekly Update – 18 August 2021

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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 Pensions Administration Standards Association (PASA) led GMP Equalisation Working Group has published Supplemental Guidance on Transfer Payments, following the 2020 judgment concerning the Lloyds Bank pension schemes (often referred to as “Lloyds 3”). The guidance examines the impact of the judgment on both transferring and receiving pension schemes that have paid/received individual transfers. The position regarding bulk transfers is also briefly considered. The guidance is intended to “assist schemes and advisers to find a pragmatic approach to equalising historical transfers”, while pointing out that the judgment itself recognised that the administration costs involved in remedying the issues could exceed the value of the correction payments required.
PASA has also set up a benefit statements working group to “evaluate the opportunities and concerns for the Trust-based pensions community in delivering government’s objectives.” PASA says that the working group will look at the changes being proposed by the government in relation to benefit statements issued by certain defined contribution schemes used for automatic enrolment, including the idea of having a benefit statement season. The working group will make appropriate recommendations to the Department for Work and Pensions (DWP).
David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at The Pensions Regulator (TPR), has published a blog on how pension schemes “can and must make a difference in the transition to a net zero economy”, following on from the launch of TPR’s consultation on climate change guidance. We can safely predict that we will hear more on this topic in the lead up to The 2021 United Nations Climate Change Conference (COP26) being held in Glasgow from 31 October. David Fairs also reminds trustees of the importance of stewardship in achieving good environmental, social and governance (ESG) outcomes and that TPR encourages trustees to sign up to the 2020 UK Stewardship Code.
Prior to 6 April 2016, increases on pre-1988 GMPs and on post-1988 GMPs in excess of 3% per annum were effectively covered by the state as part of the increases paid on the state second pension, but ceased to be so following the abolition of contracting-out. Two formerly contracted-out pension scheme members complained to the Parliamentary and Health Services Ombudsman (PHSO) about the way in which the DWP communicated this change. The PHSO published its findings in August 2019 and, in response to a question raised by the Work and Pensions Committee, the DWP subsequently said that it had paid compensation to the two complainants and that it had produced a factsheet, a draft of which was with the PHSO for review. That factsheet is now available. Pension trustees of formerly contracted-out defined benefit schemes might receive enquiries as a consequence.