UK: Key Developments In Pensions: July 2019

Last Updated: 2 September 2019
Article by Neil Bhan

Pensions Regulator: consultation focuses on governance, trustee knowledge and understanding (TKU) and driving DC consolidation. The 'Future of trusteeship and governance' consultation focuses on improving scheme governance and includes a new legal requirement for trustees to demonstrate a minimum level of TKU and ongoing learning commitment, the possibility of a mandatory professional trustee and encourages poorly governed DC schemes to consolidate.

Pensions Regulator: consolidation of all 15 existing codes into one code of practice. The Regulator will review all codes of practice and hopes to combine them into one code (to make it easier to use and update) and will formally consult later this year on the design and content.

Pensions Regulator: online tool to help with re-enrolment. This will particularly help small and micro employers re-enrol their staff and assist in the completion of the re-declaration of compliance.

Pensions Regulator: new master trust systems and processes guidance. This is intended to aid those applying for authorisation of a new master trust which will be using an external administration and investment platform. One of the five authorisation criteria is that the scheme has sufficient processes and IT systems and is effectively run.

DB scheme funding: dividends exceeding pension contributions. Research of 200 FTSE 250 companies between 2012 and 2015/16 indicated they have been paying out roughly five times more in dividends than in DB scheme contributions even though deficits increased, the behaviour of which is concerning to the Pensions Regulator.

Regulators: climate change declaration. The FCA, Prudential Regulation Authority and the Pensions Regulator welcomed the launch of the government's Green Finance Strategy and issued a joint declaration on the need for a co-ordinated response in relation to climate-related financial disclosures guidance. The Pension Regulator has said that "climate change is no longer simply a social responsibility issue" but is a financial risk that impacts businesses, markets and the economy.

DWP: response to 2014 review into survivors' benefits. The government has confirmed that following the Walker v Innospec decision that same-sex civil partners and spouses are entitled to survivor benefits in the same way as opposite-sex spouses, public service pension schemes will consult on and implement the necessary changes. Private sector schemes will need to take their own advice.

Pensions Administration Standards Association (PASA): good practice guidance on DB transfers. This voluntary guidance (Part 1 of 2) aims to improve the overall member experience through faster, safer transfers and sets out the maximum acceptable timescales for processing transfers and a transfer template. PASA anticipates the Ombudsman will reference it as a source of what good industry practice looks like. Part 2 on complex or non-standard cases will follow later.

PASA: first guide on GMP equalisation. The 'Call to Action' guide sets out the three areas schemes should initially focus on – GMP rectification, member data, and impacted transactions. Further guidance is to follow later in the year.

DWP: DB consolidation legislation. The DWP has stated it needs more time to introduce DB consolidation legislation, owing to the technical and difficult area to ensure superfunds are "held to the right standards and investment strategies and member security is being protected".

Public sector pension schemes: judges and firefighters case. The Treasury has confirmed that the decision that "transitional protections" introduced to the reformed judges and firefighters pension schemes were discriminatory will apply to all public sector pension schemes and will need to be remedied across all of them.

NHS Pension Scheme: consultation on "50/50 accrual option" to address effects of annual allowance taper. This consultation seeks to address the adverse tax impact of the annual allowance taper for highly paid clinicians which has resulted in a number of them changing their working patterns or retiring early. The proposal would allow NHS Pension Scheme members opt at the start of a tax year to reduce both their accrual and contribution rates by 50%.

Pensions Regulator: survey on 2018 public service governance and administration. This survey supported the previous assessment that the major risks relating to public service schemes arise in relation to governance, record-keeping and member communications.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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