7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

• EIOPA publishes Financial Stability Report
• European Commission extends EMIR central clearing exemption
• FCA publishes final pension transfer rules
• Lesley Williams to become next NAPF chair
• PMI elects new President
• Police pension scheme materials and guidance published
• PPF appoints new Executive Director to Board
• TPR asks DC schemes to confirm compliance with charge controls
• TPR publishes compliance and enforcement policy for public service pension schemes

EIOPA publishes Financial Stability Report

EIOPA has published its Financial Stability Report for the first half of 2015.  The report finds that a weak macroeconomic environment, continued low interest rates and increased credit risks continue to affect the insurance and occupational pension sectors of the EEA.

European Commission extends EMIR central clearing exemption

On 5 June 2015, the European Commission adopted a Delegated Regulation which will extend the current exemption for pension schemes.

EMIR is designed to improve the stability of the over-the-counter (OTC) derivative markets throughout the EU.  It requires standard derivative contracts to be cleared through central counterparties (CCPs) and establishes stringent organisational, business conduct and prudential requirements for these CCPs.  It also introduces an obligation to report derivative contracts to trade repositories.  The Regulation is designed to increase financial stability and safety by preventing the situation where the collapse of one financial firm can cause the collapse of others.

There is currently no legal obligation (whether for banks, insurers or pension schemes) to clear any OTC derivative transactions.  However, whilst the first clearing obligation in respect of interest rate swaps had been delayed, this now looks to be back on track, with phasing-in of the obligation set to begin later this year.

Pension schemes will enjoy an exemption from the clearing obligation (once in force) for all OTC derivative transactions which are “objectively measurable as reducing investment risks directly relating to the financial solvency of pension schemes”.  On 3 February 2015, the EU Commission recommended extending the exemption for a further two years (to August 2017), with a view to giving CCPs time to establish a practical way for pension schemes to clear their OTC derivative transactions.  The exemption, which has now been included in the Delegated Regulation, means that pension schemes could elect not to clear OTC derivative transactions which otherwise would need to be cleared, provided the OTC derivative transaction falls within the scope of the exemption.  Trustees should therefore consider whether they wish to delay the clearing of OTC transactions in reliance on the exemption.

Provided there is no objection from the EU Parliament or Council, the Delegated Regulation will be published in the Official Journal of the EU and will enter into force on the day after its publication.

For further information on EMIR, please refer to the Finance & Investment Briefings on our website

FCA publishes final pension transfer rules

Pension scheme members with safeguarded (ie DB) benefits over £30,000 who wish to transfer these to a DC scheme, or convert them into DC benefits within the same scheme, are required to take appropriate independent advice.  The new regime in force since 6 April 2015 has brought this within the FCA’s remit, with a requirement that such advice on transfers or conversions must be provided or checked by a pension transfer specialist.

In connection with this, the FCA has today published a Policy Statement on proposed changes to its pension transfer rules, following a consultation during March and April.

The FCA has also published a fact sheet for advisers, setting out its recommendations for dealing with clients who are insistent on taking a transfer or converting their benefits, where this is contrary to the advice they have been given.

The new rules have immediate effect.  Financial advisory firms advising on pension transfers, pension providers receiving transfer business and employer sponsors of occupational schemes should check what changes may be needed to comply with the new rules.

Lesley Williams to become next NAPF chair

The NAPF has today announced that Lesley Williams, group pensions director at Whitbread, will become the next chair of the NAPF.  She will succeed Ruston Smith, whose two-year tenure ends at the NAPF’s AGM on 16 October 2015.  Ms Williams will assume her responsibilities after the AGM for a two-year term.

PMI elects new President

The PMI has announced the election of Kevin LeGrand as its new president, taking over from current president, Paul Couchman, with effect from 9 July 2015.

Police pension scheme materials and guidance published

The Home Office has published materials relating to the 2015 police pension scheme, including guidance on early payment reduction, guidance on age additions and late payment supplements, and a calculator for working out how reforms to the scheme will affect individual pensions. It has also published guidance relating to transfer values and pension sharing on divorce in the 1987, 2006 and 2015 police pension schemes.

PPF appoints new Executive Director to Board

The PPF has announced the appointment of its Director of Strategy and Legal Affairs, David Taylor, as an Executive Director to the PPF Board, with the new title of General Counsel.

TPR asks DC schemes to confirm compliance with charge controls

TPR has announced that trustees and managers of occupational DC schemes will be asked to confirm in their next scheme return whether or not they comply with new charge-capping controls that came into force on 6 April 2015 (for more information, see our Alert).  They will also be asked to confirm the name of their scheme’s chair of trustees.

DC scheme returns will be issued in the coming months.  TPR urges trustees to ensure they fully understand the new requirements that are relevant to them.  TPR’s guide to the changes in this year’s scheme return and how to complete it in full can be found at “DC scheme return”.

TPR publishes compliance and enforcement policy for public service pension schemes

TPR published its policy on compliance and enforcement for public service pension schemes on 4 June 2015, following a period of consultation.  The policy is designed to help deliver improved outcomes for the more than 13 million members of public service pension schemes.

In April 2015, TPR published a code of practice on the governance and administration of public service pension schemes, together with a regulatory strategy, both of which are aimed at educating and enabling scheme managers and pension board members to comply with new governance and administration requirements for public service pension schemes.

The latest policy sets out how TPR aims to work with schemes to help them to comply with the new requirements, and explains how TPR will use its enforcement powers in the event that schemes do not comply.  The guidance contains online education tools including e-learning modules.

Andrew Warwick-Thompson, TPR’s executive director for DC and public service pension schemes, stated that TPR recognises “that the reforms are significant and those involved with public service schemes face complex and challenging conditions and so we are working with them to help them to understand and embed the code[…].  We will focus on working with schemes in the early stages of the new regulatory regime to help them become compliant”.

TPR also noted that over the next 12 months, it intends to reinforce its expectations for public service pension schemes in the material it publishes, and that it plans to carry out a governance and administration survey in the summer of 2015 to assess current standards and monitor improvements.