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

• Independent report: Growing a Culture of Social Impact Investing in the UK
• IA lays out vision for the future of the investment management industry
• Pension schemes newsletter 111
• PPF publishes revised actuarial factors
• Revised guidance published for DC investments
• Work and Pensions committee opens inquiry into the work of TPR
• McCloud / Sargeant case – Government denied leave to appeal

Independent report: Growing a Culture of Social Impact Investing in the UK

In 2016, the Government appointed Dame Elizabeth Corley to chair an Advisory Group looking at how to grow a culture of social impact investment and savings in the UK. Their 2017 report detailed more than 50 recommendations on how this could be achieved to “enable more people to support more easily the things they care about through their savings and investments”.

On 28 June 2019, the independent Implementation Taskforce published its final report, “Growing a culture of social impact investing in the UK”. The report highlights the progress made and the level of engagement across the private, public and social sectors. It also sets out further recommendations for certain parties, including occupational pension scheme trustees (see Chapter 2).

IA lays out vision for the future of the investment management industry

On 26 June 2019, the Investment Association outlined its vision for the future success of the investment management industry, in the UK and internationally. Its “2025 Vision” report outlines three key areas of development:

• a more value-focused industry in which sustainability and stewardship are at the forefront, particularly in the context of the challenge of global climate change. “Greater clarity of approach in the area of sustainable investment will be a critical foundation. More consistent definitions, labelling and disclosure will help customers navigate this new landscape with confidence”
• a “dynamic and responsive” UK investment fund regime. This includes the IA’s proposals to create a Long-Term Asset Fund, a new fund structure which will enable investment in a wider range of assets, with the aims of unlocking new long-term investment opportunities for savers and providing companies and infrastructure projects with funding
• the greater adoption of technology to drive innovation, improve operational efficiency, lower costs to customers and protect against increasingly complex and borderless cyber threats.

Pension schemes newsletter 111

On 26 June 2019, HMRC published newsletter 111. It includes information on:

• relief at source
• master trusts supervision
• the Managing Pension Schemes Service
• telling HMRC about pension tax charges on the SA100 tax return.

as well as an update on HMRC’s GMP equalisation working group.

The group met in May and June to consider the pension tax issues that may arise as result of GMP equalisation and is scheduled to meet again in early July 2019. It is currently focusing on what certainty can be delivered within the existing legislation and supported by guidance where appropriate. The newsletter explains that the group is “making good progress in exploring a number of approaches” and is considering these to ensure they have the desired outcome and avoid potential unintended tax consequences. As this may take some time, it is unlikely that the group will be in a position to update guidance before the autumn.

The group acknowledges that it may not be able to resolve the pension tax issues using existing legislation, but states that HMRC is “committed to finding a pragmatic and proportionate outcome”.

PPF publishes revised actuarial factors

On 28 June 2019, the PPF published revised tables containing updated actuarial factors including for commutation of periodic compensation, early retirement (step-down) periodic compensation, late retirement periodic compensation, late retirement lump sum, and lump sum conversion.

The new factors take effect from 1 October 2019.

Revised guidance published for DC investments

On 27 June 2019, TPR published revised investment guidance for DC trustees.

The guidance has been updated to reflect recent changes to legislation for DC schemes:

• trustees must make their Statement of Investment Principles (“SIP”) available free of charge on a website from October 2019
• from October 2020 trustees must produce an implementation report which explains how trustees have followed and acted on the investment policies outlined in the SIP
• the SIP must include the trustees’ policies on:
  • financially material considerations, including environmental, social and governance matters such as climate change
  • stewardship of investments, such as exercising rights (including voting rights), and on undertaking engagement activities in respect of the investments
  • the extent to which members’ views, including on ethical, social and environmental matters, are considered when planning investments
  • arrangements with asset managers.

The guidance is also intended to provide:

• further clarity around what is meant by “financially material considerations” and stewardship
• more information about preparing an implementation statement.

Work and Pensions committee opens inquiry into the work of TPR

On 26 June 2019, the Work and Pensions Committee opened a new strand of work on TPR’s “priorities and approach”.

Questions are expected to cover:

• TPR’s ongoing negotiations with Arcadia, and whether “lessons […] have now been learnt […] particularly in [TPR’s] approach to schemes and sponsors in a precarious position”
• the wider corporate regulatory framework, including the extent to which companies carrying large pension scheme deficits should be able to pay out dividends and bonuses.

There may also be questions on new pensions regulatory developments, such as the introduction of CDC, and on TPR’s “fitness and ability” to regulate emerging types of pension scheme consolidator (such as master trusts and superfunds).

McCloud / Sargeant case – Government denied leave to appeal

On 20 December 2018, the Court of Appeal held that the transitional provisions which were put in place as part of reforms to both the Judicial and Firefighters’ Pension Schemes constituted unlawful direct age discrimination (click here for our case report).

On 27 June 2019, the Supreme Court denied the Government’s request for an appeal.

A spokesperson for HMT said that the Government would “now consider how best to compensate those affected by the judgment as part of the court process.”