Welcome to our Technical update, providing you with an overview of the most recent developments within pensions and what they might mean for schemes.
News from the TPR
On 26 June 2018, the Department for Work and Pensions (DWP) launched a consultation titled “Protecting Defined Benefit pension schemes – a stronger Pensions Regulator”. This builds on the government’s White Paper earlier in the year and sets out proposals to change the Pensions Regulator’s (TPR) powers. The proposals within the consultation cover areas such as:
- Modifying the Notifiable Events framework to broaden the range of employer-related events within it;
- Introducing requirements for a Declaration of Intent for some notifiable event transactions and carrying out a review of the voluntary clearance regime;
- Complementing the existing penalty regime and enabling TPR and/or the Courts to impose more severe penalties, after considering the circumstances of a breach, including new criminal sanctions to punish ‘wilful or grossly reckless behaviour’;
- and Making changes to TPR’s anti-avoidance powers.
The consultation closed on 21 August 2018 and the DWP are now reviewing responses.
On 17 September TPR, announced that an increasing number of workplace pension schemes will come under greater scrutiny from TPR as part of a significant shift in its approach to protect savers.
TPR will maintain ongoing contact with certain schemes and in some cases their sponsoring employers, reflecting their size and strategic importance within the pensions landscape. Dedicated, one-to-one supervision will be introduced initially for 25 of the biggest schemes from this autumn, with the intention of rolling out this approach to more than 60 schemes over the next year.
According to TPR’s annual DC survey published on 14 September many smaller pension schemes are failing to demonstrate they provide good value for members. The survey highlights that the trustees of just one in ten small schemes, and one in three medium schemes, are doing everything which TPR believes is essential to assess value for members. This includes trustees having good knowledge and understanding of the costs and charges paid by members, and carrying out an annual assessment of the value the scheme represents. Small schemes are defined as schemes with 12-99 members, medium schemes with 100-999 members, and large schemes with 1,000+ members.
How this could affect you:
There is no immediate impact at present but government action as a result will be monitored and further updates will be provided. The Pension Regulator’s consultation on a revised DB Funding Code of Practice will be a key area to look out for.
Consultation on draft regulation (Master Trusts)
The Occupational Pension Schemes (Master Trusts) Regulations 2018 were made on 5 September 2018. The regulations implement the new authorisation and supervisory regime for master trust schemes under the Pension Schemes Act 2017.
- Among other things, the regulations set out: the conditions that must be met by master trusts
- Seeking authorisation, and the matters TPR must take into account in its assessments of schemes
- The authorisation fees payable by new and existing master trusts
- The scope of exemptions from the regime information and notification requirements.
The regulations will come into force on 1 October 2018. As a result all existing master trust pension schemes will have six months to apply for authorisation from TPR in order to continue operating.
How this could affect you:
The RPS, including the IWDC Section, is classified as a master trust and falls under the scope of these regulations. Therefore, the RPS will be subject to the new authorisation regime, when this comes into force, and RPMI will be working with the Trustee to plan for this.
There have been several developments in the area of pension scams and transfers recently.
On 22 June 2018, the Pension Scams Industry Group published a revised version of its Code of Good Practice on combating pension scams, updating the Code originally published in 2015. The updated Code is designed to reflect changes in the pension scams landscape, including the introduction of “pension freedoms” and the evolving tactics by scammers.
Following an earlier consultation on the policy to ban cold calling HM Treasury published a consultation on 20 July 2018, seeking technical views on draft regulations to ban pensions cold calling in an attempt to reduce the number of pension scams.
In summary the proposal is to amend The Privacy and Electronic Communications Regulations (PECR) to prohibit cold calling in relation to pensions unless certain criteria is met i.e. consent or existing relationship. PECR are regulations which sit along the Data Protection legislation and are enforced by the Information Commissioners Office (ICO).
The consultation closed on 17 August 2018.
TPR have refreshed its pension scam materials which now includes a four step guide to help individuals to identify and prevent pension scams. The new material also includes downloadable posters for employers to display in their workplace.
How this could affect you:
We welcome any moves to reduce the number of pension scams and would encourage employers to warn their employees of the potential risks.
In a statement to Parliament on 4 September 2018, Guy Opperman, the Parliamentary Under Secretary of State for Pensions & Financial Inclusion set out some of the DWP priorities in relation to workplace pensions.
Some of the points raised in the statement are covered elsewhere in this update but the statement included information on:
• The pension dashboard, which will be ‘industry-led’ and ‘facilitated by government’. This announcement seems to squash previous rumour that the pension dashboard, which will offer people the opportunity to access their pension information in a single place online, would be scrapped.
• The new Single Financial Guidance Body, which will combine together the services currently delivered by the Money Advice Service, the Pensions Advisory Service and Pension Wise, is expected to be established in October 2018, ahead of a formal launch in January 2019.
• How to facilitate consolidation of DB schemes, including looking at the establishment of ‘superfunds’, and intention to publish a consultation on this in the autumn.
• The DWP is currently working through proposals for the first Collective Defined Contribution schemes in the UK and intends to launch a formal consultation in the autumn. How this could affect you:
No immediate impact but any developments will be monitored.
On 12 February 2018, DWP and HM Treasury published a response to the Work and Pensions Select Committee’s report titled “Protecting pensions against scams: priorities for the Financial Guidance and Claims Bill”. This called for the government to take urgent legislative action in order to have an enforceable ban on cold calling by June 2018 at the latest and that individuals should either receive or expressly refuse guidance before being granted access to a pension pot.
In response the government have made amendments to the Financial Guidance and Claims Bill which take forward key recommendations of the Work and Pensions Committee.
In addition, the latest Finance (No. 2) Bill was published on 16 January 2018. The Bill includes the new powers for HMRC to register and deregister certain pension schemes to tackle scams and fraudulent schemes. The Bill also includes powers for HMRC to refuse to register master trusts not authorised by TPR, or occupational pension schemes whose sponsoring employer has been a dormant company for a continuous period of one month. The measures in the Bill are intended to come into force on 6 April 2018.
How this could affect you:
It is expected that the ECJ ruling will not materially increase PPF liabilities. Therefore, the proposed levy basis is not expected to impact levy payers.
RPMI Technical team