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

• Coronavirus – Sackers response
• Automatic enrolment and pension contributions: COVID-19 guidance for employers
• FCA issues Coronavirus guidance and delays retirement outcomes review and platform switching remedies
• FCA 2020/21 business plan and fees and levies consultation
• MAPS report on pensions dashboards
• PLSA urges pension schemes to “put companies on watch” over Coronavirus response
• TPR extends deadline for DB funding code consultation
• TPR update on reporting duties and enforcement activity

Coronavirus – Sackers response

At Sackers we are committed to ensuring that the Coronavirus outbreak causes minimal disruption for our clients, and have taken several steps to ensure it is ‘business as usual’. For details of these steps, as well as key points for trustees and employers to consider in light of the outbreak (which we will continue to update), please see the dedicated section of our website, or talk to your usual Sackers contact.

Automatic enrolment and pension contributions: COVID-19 guidance for employers

On 9 April 2020, TPR published its latest in a series of guidance in response to the global Coronavirus pandemic. This most recent addition is aimed at employers and covers automatic enrolment and pension contributions (“the Guidance”). 

 The key points to note are: 

• the Guidance looks at the interplay between the Government’s Job Retention Scheme and AE, providing much needed clarity 
• crucially, the Guidance confirms that the maximum pension contribution an employer can claim is 3% of “qualifying earnings” (ie the statutory default mechanism for DC schemes), regardless of whether one of the legislative alternatives is used for satisfying an employer’s AE obligations 
• as required by legislation, TPR expects employers looking to reduce DC contributions to consult affected staff beforehand. However, in limited circumstances, it will not take regulatory action if the minimum timeframe for consulting (60 days) is not met. 
• in separate guidance also issued on 9 April, TPR confirmed that it is asking “scheme providers” (including trustees) to report late contribution payments at 150 days late, rather than the usual 90 days 
• TPR is also reminding employers of their automatic enrolment duties, both for new employers and those coming up to re-enrolment 
• further guidance from TPR is promised this week. Please watch out for a Sackers update. 

For more detail, please see our Alert. 

The Government also updated its guidance on claiming for employees’ wages through the Coronavirus Job Retention Scheme on 9 April 2020, adding further information on eligibility and pension contributions.  This includes a statement, reflecting the above Guidance, that “the maximum level of grant for employer pension contributions on subsidised furlough pay is set in line with the minimum automatic enrolment employer contribution of 3% on qualifying earnings”.  It also clarifies that “grants for pension contributions can be claimed up to this cap provided the employer will pay the whole amount claimed to a pension scheme for the employee as an employer contribution” and, in relation to salary sacrifice, that “all the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme”. 

On 8 April 2020, HMRC gave evidence to the Treasury Committee on the Job Retention Scheme, suggesting that the Scheme will open on 20 April 2020. 

FCA issues Coronavirus guidance and delays retirement outcomes review and platform switching remedies

On 7 April 2020, the FCA published guidance for pension providers and DB transfer advisers, in light of the impact of Coronavirus.  The guidance sets out its views on how firms can and should support consumers seeking to access to their pension savings during the current pandemic.  This includes guidance on communicating with customers about their pensions, how to deal with individuals seeking to access their pension funds or change their investments, and the FCA’s expectations of advisers giving DB transfer advice.  

The guidance also explains that the FCA has deferred the implementation date for the final suite of Retirement Outcomes Review remedies (see 7 Days):  

• introducing “investment pathways” for consumers entering drawdown without taking advice 
• ensuring that consumers entering drawdown invest predominantly in cash only if they take an active decision to do so 
• giving consumers in decumulation annual information on all the costs and charges they have paid. 

The FCA Board has made new rules to extend the implementation dates of the above changes by six months, to 1 February 2021.  These new rules also (amongst other things) include provisions to delay implementation of changes intended to make it easier for consumers to move from one platform to another without liquidating their assets (see 7 Days) until 1 February 2021. 

The FCA also published guidance on 6 April 2020 on its expectations regarding funds, including agreement that firms can delay publishing annual and half-yearly reports and guidance on holding virtual general meetings, ensuring compliance with limits on value at risk (“VaR”) and using electronic signatures.

FCA 2020/21 business plan and fees and levies consultation

On 7 April 2020, the FCA published its 2020/21 business plan, setting out its areas of focus for the next year and its priority areas for the next one to three years.  In relation to pensions, the plan focusses on scams and market volatility caused by Coronavirus.  The FCA sets out three target outcomes to address these issues, that: 

• investment products are appropriate for consumer needs 
• consumers make effective decisions about their investments 
• firms and individuals operate under high regulatory standards and act in consumers’ interests. 

The FCA also launched a consultation on 7 April on its periodic fees rates for 2020/21.  Taking into account the impact of Coronavirus, the FCA has proposed that the minimum level of fees, paid by smaller firms, will be frozen and medium-sized and larger firms will have a two month extension to the deadline for paying their fees.  The consultation also covers the levy for MAPS, which is proposed to increase by 21% from last year’s level and includes funding for the pensions dashboard (see our Alert).  The consultation closes on 19 May 2020.

MAPS report on pensions dashboards

On 8 April 2020, MAPS published its first full report on the progress made so far with the pensions dashboards and the work that needs to be undertaken before the service launches to the public. MAPS recognises “the need to provide a clear delivery timetable with firm dates”; it intends “to set out the shape of a more detailed programme timeline before the end of the year but inevitably uncertainty will remain” keeping in mind the “scale of the challenge both from a delivery and external environment perspective”. 

Two additional papers setting out thinking on the scope of dashboards and the data elements required from pension providers are also being made available online. These are intended to assist with the “focus over the next six months” on “progressing and resolving the key dependencies and most significant challenges”, in particular the “development of the data standards with which pension providers and schemes will have to comply”.  Industry views will be sought on these topics “later in the year”. 

PLSA urges pension schemes to “put companies on watch” over Coronavirus response

On 9 April 2020, the PLSA issued a press release “reminding pension schemes to be watchful of how the companies in which they invest respond to the COVID-19 pandemic and be prepared to hold directors to account as decisions now may impact their long-term investment prospects”.  The PLSA acknowledges that “companies have generally acted responsibly”, but notes that there have also been reports that “some firms nationwide are laying off or furloughing members of staff in a bid to manage their outgoings during the crisis while high-paid directors and chief executives maintain full pay and bonuses”.  

Given the current crisis, the PLSA has added to its annual stewardship guide and voting guidelines (see 7 Days) that investors must “keep an eye on how those firms in which they invest manage the pandemic and consider voting against directors who they believe did not behave appropriately towards their workforces this AGM season”. 

TPR extends deadline for DB funding code consultation

TPR has extended the deadline for the first stage of its consultation on its revised code of practice for DB funding (see our Alert).  The consultation sets out TPR’s initial proposals for a “clearer, more readily enforceable funding framework, which implements the new requirements set out in the Pension Schemes Bill”.  The closing date for responses is now 2 September 2020 (previously 2 June). 

TPR update on reporting duties and enforcement activity

Update: See 7 Days of 22 June 2020 for TPR’s update on its easements applicable from 1 July 2020.

On 9 April 2020, TPR published an update on its approach to reporting duties and enforcement activity during the Coronavirus pandemic, stating that it “will take a reasonable, pragmatic and proportionate approach” to regulatory work during this time.  Its general approach to a number of administrative and governance requirements will be based on the following guiding principles: 

• reporting: if the breach will be rectified within a short timeframe (not more than three months) and it does not have a negative impact on savers, there is no need to report to TPR, but records should be kept of any decisions made and actions taken 
• enforcement: in making decisions about whether to take regulatory action in respect of breaches of administrative and compliance requirements, TPR will do so on a case-by-case basis and adopt a flexible approach “ie granting longer periods to comply and taking COVID-19 into account”. 

These easements will remain in place until 30 June 2020, but TPR “will review whether more specific flexibilities or restrictions are required during the following weeks – and whether the date should be extended”. 

The update also gives the following non-exhaustive list of areas where TPR will not be using the above guiding principles, or where TPR provides more detail: annual benefit statements, chair’s statements, charge controls, DB transfer values, employer consultation, employer related investment, investment governance, late accounts, late payment of contributions, master trusts, notifiable events and where a recovery plan is not agreed. 

For schemes in relationship-managed supervision, TPR states it is “focusing more on near-term risks rather than the standard activities in our supervisory cycle”. TPR “will be speaking to relationship-managed schemes to better understand their position and the risks and issues that have arisen”.  For other schemes, TPR “will continue to take a risk-based approach” to regulatory activity, “reviewing and assessing incoming requests against a range of risk indicators”.