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) updated its code of practice 12 in September, to take account of the new contribution notice tests (employer resources test and employer insolvency test) set out in the Pension Schemes Act 2021. Broadly speaking, the employer resources test is where TPR is of the opinion that an act or omission has occurred that has reduced the value of the resources of the employer and the reduction was material relative to the estimated section 75 debt in the scheme. The employer insolvency test is met where TPR is of the opinion that a scheme is underfunded and if a debt were due to the scheme immediately after an act/omission, that act/omission would have materially reduced the amount likely to be recovered by the scheme. In both cases, TPR must consider it reasonable to act and defences are available. These two new tests make it easier for TPR to issue a contribution notice, as they focus on a snapshot in time, rather than having to estimate the future impact of an event. The updated code came into force on 25 November 2021. The code sets out the circumstances in which TPR will use its contribution notice powers where it believes that the material detriment test, employer resources test or employer insolvency test has been met. The guidance has also been updated to incorporate some of the most common scenarios that TPR has encountered since TPR came into existence in 2005.
The government has launched a policy consultation on proposals to remove performance-based fees from the charge cap that applies to defined contribution (DC) pension schemes used for automatic enrolment. The aim is to “inform future policy to help ensure DC schemes are able to access a broader range of illiquid asset classes that have the potential to result in positive outcomes for members”. Consultation closes on 18 January 2022.
The Dormant Assets Bill is making its way through Parliament. It started in the House of Lords and has progressed onto its second reading in the House of Commons. The bill is interesting because at the consultation stage, the government proposed that pensions should be specifically excluded from the scope of assets that could be transferred to the dormant assets scheme. Following responses received from the insurance industry, however, the government's outcome of consultation said that it would include certain “unclaimed” benefits payable under a personal pension scheme (that had never been used as an automatic enrolment scheme), as well as additional assets from the insurance, investment and wealth management, and securities sectors.
In our weekly update on 3 November 2021, we commented that a Private Members' Bill is currently making its way through Parliament. The bill amends the guaranteed minimum pension conversion legislation and the Department for Work and Pensions has been involved with its drafting. The bill started in the House of Commons and had its second reading on 26 November 2021. The House of Commons briefing note, published before the second reading, contains a neat summary of the purpose of the bill: to clarify that the legislation applies to survivors as well as earners; to provide for a power to set out in regulations the conditions that must be met in relation to survivors' benefits; to provide for a power to set out in regulations detail about who must consent to the conversion; and to remove the requirement to notify HMRC.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.