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 Regulator (TPR) has had a busy week. First, it has published its new criminal offences policy, along with its response to consultation on that policy. Addressing concerns that TPR's new powers could hinder legitimate corporate activity, the final version of the policy is more detailed than the original draft, and includes some helpful examples clarifying the types of scenarios that are unlikely to fall within the scope of the new criminal offences (although, obviously, each case will be judged on its own merits). For example, TPR has said that it would generally expect a person to have a reasonable excuse if they enter into an easement under the employer debt legislation or if a person proposes or acts in accordance with a scheme authorised by a court under the new Corporate Insolvency and Governance Act 2020.
Second, TPR issued a final form code of practice 12, updated accompanying guidance and its response to consultation on the revised code. The revised code has been laid before Parliament and will come into force once it has completed the parliamentary process. Two new tests (the employer insolvency test and the employer resources test) are incorporated into the code. These tests are now available to TPR when deciding whether to issue a contribution notice. The new tests are likely to make it easier for TPR to employ its powers to issue a contribution notice. This is because they allow TPR to look at the circumstances of the employer at a particular point in time, rather than having to assess whether a particular act might have a detrimental impact on the pension scheme at a future point in time.
Third, TPR has issued a consultation on three new draft policies dealing with TPR's new enforcement powers. The new policies cover TPR's overlapping powers, monetary penalty powers (focusing on the ability to impose high fines relating to information requirements and avoidance-related scenarios) and TPR's information gathering powers. These policies address some of the concerns raised when TPR consulted on its new criminal powers policy.
The Small Pots Cross-Industry Co-ordination Group has issued an update report. At 69 pages, this is not a quick read, but it highlights the many and varied challenges that need to be addressed before a cost-effective, automated transfer system for small deferred pension pots can be implemented. Many aspects of the project are “work in progress” – the target implementation date is 2025 to 2026.
The Financial Conduct Authority (FCA) has issued new rules, effective from 4 October 2021, setting out how Independent Governance Committees and Governance Advisory Arrangements should compare the value of pension products and services and promote the best value for pension scheme members. This is seen by the FCA as a step towards a “more systematic and transparent framework” for assessing value for money, designed to achieve broad consistency with TPR’s expectations for trustees of occupational pension schemes.
David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at TPR, has issued a blog supporting the work of the Productive Finance Working Group on developing solutions to barriers to investing in less liquid assets. The group’s work is aimed at defined contribution schemes. TPR plans to issue additional guidance for trustees on illiquid investments in 2022.
We are now coming up to the third anniversary of the landmark Lloyds case. This case confirmed a legal requirement to provide sex equality in pension scheme benefit structures, and remove any remaining inequality resulting from unequal guaranteed minimum pensions (GMPs). Earlier this year, we issued a survey to our clients and contacts, to see the progress being made in this direction. Although very few of the participants had completed their GMP equalisation projects, our survey found that the majority of schemes had placed the issue on their “to-do” list, and were actively considering their options. Responses also indicated that the great majority of schemes are now paying transfer values on an equalised basis and had begun to identify data gaps that could impede the implementation of GMP equalisation. Lack of data, uncertainty over tax treatment and (to a certain extent) the cost were cited as key reasons why GMP equalisation has not yet been completed.
We are keen to discover how pension schemes are now reacting to the growing pressure to progress their GMP equalisation projects and whether solutions to GMP equalisation challenges are evolving. We are, therefore, re-running the survey and would be grateful if you could spare a couple of minutes to share your experience and views by answering a few short questions. Please complete the survey (individual submissions will be kept confidential).
In our latest blog, Pensions partner Catherine McKenna takes a look at the Pension Scheme Act measures that came into force on 1 October 2021.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.