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

• The Queen’s Speech
• FCA sets out latest expectations for firms on Brexit
• Budget 2019 date announced
• PPF begins next phase after the Hampshire ruling
• Cross-border schemes: guidance in the event of a no-deal Brexit
• Safeway v Newton (CJEU – 7 October 2019)

The Queen’s Speech

Expected to be one of the most significant pieces of pensions legislation of the decade, the Queen’s Speech today confirmed that there will be a new Pensions Bill.

As trailed by the Parliamentary Under-Secretary of State for Pensions and Financial Inclusion, Guy Opperman, the Bill will lay the groundwork for collective DC schemes and pensions dashboards. Also, with the aim of helping it to fulfil its ambition of being “clearer, quicker, and tougher”, TPR will be given new powers to gain redress when things go wrong in pension schemes and to deter “reckless behaviours”.

The accompanying background briefing notes also outline the following changes which the Bill will address:

• “improving” the DB funding system by requiring a statement from trustees on their funding strategy
• set against the backdrop of concerns about pension scams, creating new regulations setting out the circumstances in which a pension scheme member will have the right to transfer their pension savings to another scheme
• amending PPF legislation to ensure that the compensation regime continues to apply “as intended”, as well as amending the definition of administration charges.

In line with the DWP’s guidance on GMP conversion published back in April 2019, we are also expecting the Bill to include potential easements to the GMP conversion legislation.

FCA sets out latest expectations for firms on Brexit

The FCA and regulated firms have been taking steps to prepare in the event the UK leaves the EU on 31 October 2019 without a deal. On 11 October 2019, the FCA issued an update on steps certain firms need to take.

The FCA is aware that leaving the EU during the working week could pose operational challenges for firms. During this time, firms should take reasonable steps to be prepared to comply with post-exit MiFID transaction reporting and EMIR trade reporting requirements. The FCA will take a proportionate and pragmatic approach to supervising reporting around exit day.

Alongside this, if the UK leaves the EU without a deal, passporting will end. Any EEA passporting firm wishing to continue operating in the UK will need to notify the FCA by 30 October that they wish to enter the Temporary Permissions Regime. Fund managers have until 16 October 2019 to inform the FCA if they want to make changes to their existing notification.

After exit, firms which notified the FCA of their intention to use the Temporary Permissions Regime will be contacted and provided with a “landing slot” for submitting their application for full UK authorisation. Upon authorisation, the FCA will generally expect firms to have a physical presence in the UK to help ensure effective supervision. The FCA will be consulting on its approach and expectations shortly.

Budget 2019 date announced

The Chancellor of the Exchequer, Sajid Javid, has announced he is planning to hold a Budget on Wednesday 6 November 2019.

PPF begins next phase after the Hampshire ruling

The PPF is already making increased payments to all pensioners who were most affected by the CJEU’s ruling in Hampshire, because they were subject to the PPF compensation cap (either the standard cap or the long service cap), which on its own had reduced their benefits to less than 50% of those they had accrued.

On 10 October 2019, the PPF announced that it has now started to work up its approach for assessing and paying the remaining members who are affected by the ruling. It will start with pensioners for whom the effect of the cap alone did not take them below the 50% minimum but, when combined with other factors, do fall below the threshold. Examples of such factors might be:

• if the annual increases a member would have received under their former scheme would have been significantly more than the annual increases which apply under the PPF
• differences between their former scheme’s benefit structure and the PPF’s benefit structure, eg spouse’s benefits.

Cross-border schemes: guidance in the event of a no-deal Brexit

TPR has issued guidance for cross-border schemes which sets out the steps it considers they should take in the event of a no-deal Brexit, and encouraging such schemes to put in place contingency plans now.

Safeway v Newton (CJEU – 7 October 2019)

In October 2017, the Court of Appeal referred a question to the CJEU regarding a scheme’s ability to equalise its retirement ages retrospectively.

The CJEU has followed the Advocate General’s earlier opinion, concluding that, in the absence of an objective justification, the prohibition under EU law on retroactive levelling down applies even when the rules of a pension scheme permit retrospective amendment (as they did in this case).

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