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

• TPR’s 2019 funding statement
• New legislation published
• Brexit: Data Protection Regulations made
• FCA and FOS policy statement on increasing FOS award limits
• HMRC publishes Countdown Bulletin issue 44
• PLSA publishes “Made Simple” guides
• TPR publishes blog on employer-related investment rules

TPR’s 2019 funding statement

TPR published its annual funding statement on 5 March 2019. While primarily aimed at those carrying out valuations with effective dates in the period 22 September 2018 to 21 September 2019 (“Tranche 14”), it is relevant to all DB pension scheme trustees and employers.

The statement includes a specific focus on long-term funding targets (“LTFTs”). Recognising the importance of paying promised benefits, TPR expects trustees and employers to set an LTFT consistent with achieving that objective.

The statement also focuses on dividends and deficits, and the intersection between shareholders and trustees. TPR notes that it continues to take a tough stance where it sees “inequitable treatment” of schemes relative to that of shareholders, as well as recovery plans that it views as unacceptably long.

Dividing schemes into 10 distinct categories based on covenant strength, funding and investment, TPR sets out “more clearly and explicitly” the key risks and actions it expects trustees and employers to consider. With the annual funding statement having a much more technical focus than in the past, trustees and employers in Tranche 14 should seek early advice on how it affects them.

Finally, TPR confirms its intention to review and update its DB funding code as part of the package of actions stemming from the DB White Paper. It will consult in summer 2019 “on various options for a revised funding framework under the new code”, and “shortly after” will consult on the revised code itself.

For further information, please see our Alert.

New legislation published

The Social Security Revaluation of Earnings Factors Order 2019 was laid before Parliament on 4 March 2019. The Order sets the rate for revaluing deferred GMPs in formerly contracted-out DB schemes, in line with the movement in average earnings.  This is set at 2.8%, reflecting the increase in average earnings in Great Britain in the year to September 2018.

The Public Service Pensions Revaluation Order 2019 was laid on 7 March 2019, and provides for public service pension revaluation in deferment.

Brexit: Data Protection Regulations made

The Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019 and The Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) (No. 2) Regulations 2019 have been published.

Together they correct deficiencies in EU-derived data protection legislation as a result of the withdrawal of the UK from the EU, and aim to ensure that the legal framework for data protection within the UK continues to function correctly after “exit day” (defined in the European Union (Withdrawal) Act 2018 as 11:00pm on 29 March 2019).

As the GDPR will no longer apply directly in the UK post-Brexit, the regulations introduce a single regime for general processing activities known as the “UK GDPR”. Consequential changes throughout the DPA 2018, and to other legislation, were required as a result of this.

The regulations come into force on exit day.

FCA and FOS policy statement on increasing FOS award limits

On 8 March 2019, the FCA published a joint policy statement with FOS, and final rules, in relation to increasing FOS’s award limits.

The FCA has confirmed that it will introduce the changes it consulted on in October 2018. From 1 April 2019 the FOS’s £150,000 award limit will therefore change to:

• £350,000 for complaints about acts or omissions by firms on or after 1 April 2019
• £160,000 for complaints about acts or omissions by firms before 1 April 2019 and which are referred to the FOS after that date.

The reward limit will remain at £150,000 for complaints referred to the FOS before 1 April 2019.

From 1 April 2020 onwards, award limits will be automatically adjusted yearly to ensure they keep pace with inflation, in line with CPI.

HMRC publishes Countdown Bulletin issue 44

On 5 March 2019, HMRC published issue 44 of its “Countdown Bulletin”, which provides information for schemes following the ending of DB contracting-out.

The Bulletin contains information on Scheme Financial Reconciliation, with news of changes to the dates provided in Bulletin 42. Schemes in deficit following HMRC’s financial reconciliation can now expect to hear from HMRC in the week commencing 1 April 2019, while for any payments due, 21 May 2019 remains the date for these to reach HMRC.

PLSA publishes “Made Simple” guides

The PLSA has published two new guides in its “Made Simple” series. The first, on patient capital, “aims to demystify the concept of patient capital and private markets investing and provide investors with a useful tool to aid discussions with trustees and members alike.”

The second guide covers “multi-strategy alternative credit”, which “makes use of flexible and dynamic asset allocation within a credit portfolio”. The guide aims to give a “concise and informative overview designed to help pension funds understand this approach and how it might help them generate returns.”

TPR publishes blog on employer-related investment rules

TPR published a blog post on 4 March 2019, by litigation lawyer Simon Broadhurst, in which he discusses the “complex and wide-ranging” rules surrounding employer-related investment (“ERI”).

He notes that TPR currently has a number of investigations ongoing into ERI, and that it will take action where it suspects offences are being committed.

TPR recommends “sound internal governance” as key to avoiding ERI problems, and has issued guidance on how to identify, monitor and manage conflicts of interest, including between the interests of the scheme and the employer. The blog also refers readers to an earlier statement from TPR on ERI.