In case you missed it - key developments in pensions law and practice for May 2022
27th May, 2022
Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022
Parliament has just published the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022, following its Royal Assent on 28 April 2022. The Act amends provisions in the Pension Schemes Act 1993 and the Pensions Act 2007in order to help occupational pension schemes to convert Guaranteed Minimum Pension (GMP) benefits into other scheme benefits. It does this by clarifying that the legislation applies to the survivors of those who earned the GMP and by removing the requirement to notify HMRC of every individual whose benefits are being converted. Some provisions are though subject to regulations, which have not yet been published.
Queen’s Speech 2022
On behalf of Her Majesty the Queen, Prince Charles set out the government’s priorities and proposed policies for the next parliamentary session at the State Opening of Parliament. The Queen’s Speech 2022 did not contain any new ‘Pension Acts’, but some of the Bills announced may be relevant to workplace pensions; e.g. – The Online Safety Bill, Data Reform Bill and Brexit Freedoms Bill revoking retained EU law on financial services.
The Pensions Regulator (TPR)
2022 Annual Funding Statement
The Pensions Regulator (TPR) has released its latest Annual Funding Statement (AFS).
AFS 2022 is particularly relevant to trustees approaching ‘Tranche 17 valuations’ and recognises the pressures (e.g. the economic background) and uncertainties (e.g. Ukraine) that trustees are facing, and the potential impact of this on their pension scheme funding and employer covenant. TPR nevertheless expects trustees to “remain alert”, to think about their long-term funding target and journey towards it and to consider risks in an integrated way.
Importantly each scheme is expected to “consider its position depending on its own circumstances”.
This years AFS, as with AFS 2021, is accompanied by helpful tables setting out key risks that TPR expects trustees and employers to focus on, and actions to take, depending on the scheme’s funding strength, maturity, and strength of the employer covenant. The tables are the same as last year, except the reference to the length of the recovery plan has been updated to six years (to reflect that recovery plan lengths have decreased over recent years and the average is now less than six years across all valuation tranches).
TPR has also published its Annual Funding Statement Analysis for 2022, which is a review of DB pension schemes with valuation dates between September 2021 and September 2022 (Tranche 17 or T17 valuations). The analysis shows that most major asset classes invested in by UK pension funds achieved substantially positive returns over the three years to 31 December 2021 and the three years to 31 March 2022. The report also reveals that nominal gilt yields were significantly lower at 31 December 2021 than they were three years earlier, whereas at 31 March 2022 nominal gilt yields were higher.
Consultation on new enforcement and prosecution policies
TPR has published, for consultation, its new, consolidated and simpler draft enforcement policy and an updated prosecution policy. The draft new enforcement policy consolidates previous policies for defined benefit, hybrid, public sector pension schemes and defined contribution pension schemes. Both the enforcement and prosecution policies have been updated to include the new powers granted to TPR in the Pension Schemes Act 2021.
TPR has also published its response to last year’s consultation on new policies regarding overlapping powers (where TPR has the choice to use regulatory / financial penalty and / or pursue criminal prosecution), monetary penalty powers (high fines) and TPR’s approach to information gathering.
In light of this exercise, TPR’s approach to overlapping powers and information gathering is now incorporated as chapters in the draft new enforcement policy. The finalised new high fines policies for its avoidance-type powers and information requirements powers are published separately.
PDP publishes blog on consumer protection landscape
The Pensions Dashboards Programme (PDP) has published a blog on the challenge of consumer protection. Head of Policy, Engagement and Analysis David Reid wrote: “Pensions dashboards present a novel challenge when it comes to consumer protection as they bring together personal data from a range of sources. Each user may have several pensions sitting within different schemes, which are displayed on a dashboard run by a separate organisation. So individuals will be reliant on multiple organisations having the right mechanism in place to protect their data and personal information.”
Key dates in 2022
Starting Spring 2022
Migration of pension schemes from the HMRC Pension schemes online service to the Managing pension schemes service
Migration from old to new online service for scheme administrators
Spring / Summer
Consultation due to be published on new draft funding regulations which will require trustees to have a long-term funding and investment strategy
Spring / Summer
New DWP guidance to improve scheme voting and engagement, and the content of implementation statements
Following an earlier consultation, new guidance is expected around pension scheme implementation statements, and voting and engagement practices
Spring (end of Q1/2022)
New Pensions Regulator Single Code of Practice
Further draft of new Single Code, which will eventually replace 15 existing Codes of Practice
Final rules effective that require trustees and pension providers to implement the ‘stronger nudge to Pension Wise guidance’
Trustees and GPP providers will have to give members with flexible (DC/cash balance) benefits a stronger nudge to book a free Pension Wise appointment when accessing their savings
Trial for Pensions Regulator’s multi-million-pound pension fraud case
Pension scam case
For DC schemes with assets of less than £100m preparing chair’s statements after this date (for year ends after 31 December 2021), new Value for Members (VfM) information will need to be included
The Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2021 effective
Legislation to enable single or connected employer collective money purchase schemes to apply to TPR for authorisation
Judicial review of reform of RPI
Challenge to Government decision to replace RPI with CPIH in 2030 is expected
Second consultation on new Scheme-Funding Regime
Second part of TPR consultation on the revised DB funding code
Extension of climate risk governance and reporting requirements for occupational pension schemes with £1 billion or more assets
Requirements for large schemes to report on climate risk
Simplified Benefit Statements – Occupational and Personal Pension Schemes (Disclosure of Information) (Amendment) Regulations 2022, SI 2021/1150, come into force
Introduction of ‘2-page’ benefit statement
Investment in ‘illiquids’
DWP proposals, expected to take effect in October, will require DC pension schemes to disclose and explain their policies on illiquid investment and, for schemes with over £100m of assets, to disclose their current asset classes to members. Also, draft regulations remove certain employer-related restrictions that currently apply to large authorised Master Trusts
Changes to Notifiable Events regime expected
Revisions to scheme and employer-related events that must be notified to The Pensions Regulator
Collective DC schemes
Consultation on multi-employer collective defined contribution (CDC) pensions expected