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

• Government response – a stronger Pensions Regulator
• Occupational and Personal Pension Schemes (Amendment etc) (EU Exit) Regulations 2019 published
• The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2019
• DWP DC consultation: “Investment innovation and future consolidation”
• Pensions dashboard: Government confirms provider data compulsion
• Planning and preparing for later life: social survey feasibility study
• Agreement reached on EMIR Refit Regulation

Government response – a stronger Pensions Regulator

On 11 February 2019, the Government published a response to its consultation on bolstering TPR’s powers, which stemmed from last year’s White Paper.

The proposals, which the Government believes will help TPR “to meet [its] ambition to be ‘clearer, quicker, and tougher’”, include changes to help ensure that TPR has access to more timely information to improve its oversight of corporate activity. This will involve extending the current notifiable events regime, introducing a new requirement for sponsors to produce a “declaration of intent” prior to certain business transactions, and improving TPR’s existing anti-avoidance powers.

The Government will also introduce two new criminal offences targeting “individuals who wilfully or recklessly mishandle pension schemes” and those who fail to comply with a contribution notice (a new civil penalty of up to £1 million will also be introduced to cover the latter).

The response confirms that the Government will “bring forward legislation as soon as Parliamentary time allows, and will continue to engage with stakeholders on the detail” (eg on key definitions in relation to notifiable events and the appropriate level of the fixed and escalating penalties).

Please see our forthcoming Alert for further detail.

In a press release published by TPR on the same day, Nicola Parish, Executive Director for Frontline Regulation, welcomed the proposed powers and confirmed that TPR is “working closely with government to ensure that the new legislation is effective and works in practice”.

Occupational and Personal Pension Schemes (Amendment etc) (EU Exit) Regulations 2019 published

The Occupational and Personal Pension Schemes (Amendment etc) (EU Exit) Regulations 2019 were made on 5 February 2019.

The regulations aim to make minor technical changes to UK pensions legislation that would otherwise no longer operate effectively following the UK’s withdrawal from the EU in a “no deal” scenario. They take effect from exit day.

The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2019

On 4 February 2019, the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling and Compensation Cap) Order 2019 was laid.

The Order updates the compensation cap factors, specifying the earnings percentage used to calculate the levy ceiling, the amount of the levy ceiling, and the standard amount of the compensation cap for use in relation to the PPF in the financial year beginning on 1 April 2019.

The PPF notes that “only around 0.5% of [its] members are affected by the compensation cap”. From 1 April 2019, the cap at age 65 has been set at £40,020, an increase of 2.6% from the 2018/19 cap of £39,006. A member to whom the 90% cap applies would therefore receive £36,018.

DWP DC consultation: “Investment innovation and future consolidation”

On 5 February 2019, the DWP issued “a consultation on the consideration of illiquid assets and the development of scale” in occupational DC schemes. The consultation is part of the Government’s work in relation to “patient capital”, and follows HMT’s consultation on “Financing growth in innovative firms”, recommendations by the Law Commission in their 2017 report on Pension Funds and Social Investment, and announcements as part of the Budget 2018.

The consultation puts forward three policy proposals which are aimed at facilitating investment by DC schemes in less liquid assets such as smaller and medium-sized unlisted firms, housing, green energy projects and other infrastructure.

The proposals include:

• requiring “larger” DC schemes (those with 5,000 or more members) to document and publish their policy in relation to investment in illiquid assets and report annually on their approximate percentage allocation to this kind of investment
• requiring some or all smaller DC pension schemes to conduct a triennial assessment of whether their members may receive better value if they were transferred into “a larger scheme with more scale”
• offering an additional method of assessment for compliance with the default fund charge cap in order to accommodate performance fees (common in funds offering illiquid assets) and therefore widening the range of potential investments.

The consultation closes on 1 April 2019.

On the same day, the All-Party Parliamentary Group on Alternative Investment Management published a report examining the potential benefits of alternative investments to DC schemes.

Pensions dashboard: Government confirms provider data compulsion

During debate in the House of Commons on 6 February 2019, the Parliamentary Under-Secretary of State for Work and Pensions, Guy Opperman, confirmed that the Government will compel providers to provide data for the pensions dashboard.

He acknowledged that a debate remained to be had about whether a specific time limit for data provision should be put in place, or “whether that is done in secondary legislation, and with merely indicative outlines”.

Mr Opperman confirmed that further detail would be given by the DWP in its response to the dashboard feasibility study and consultation which is due to be published in March 2019.

Planning and preparing for later life: social survey feasibility study

On 6 February 2019, the DWP published a report presenting the findings of a feasibility study into how it can “better understand the ways people plan and prepare for later life”.

The study examines the most appropriate and cost-effective means for the Government to get policy-relevant evidence across these areas in the UK. It also makes recommendations to help inform the future direction of research into later life decisions relating to work, retirement planning and pension saving, including introducing a bespoke, cross-sectional survey of 40 to 75 year olds, repeated every 3 to 5 years.

Agreement reached on EMIR Refit Regulation

On 5 February 2019, the Council of the EU published a press release announcing that it had reached a preliminary agreement with the European Parliament on the proposal for a regulation to amend and simplify EMIR (the regulation on OTC derivative transactions, central counterparties and trade repositories (the EMIR Refit Regulation)).

Amongst other things, the Council’s press release highlights the proposed extension by another two years (further extendable, twice, by an additional year) of the temporary exemption from the clearing obligation of pension scheme arrangements.

The deal will now be submitted to EU ambassadors for endorsement.