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

• GMP equalisation – DWP guidance published on using conversion legislation
• CMA market study: final report published
• FCA publishes 2019/20 business plan and levy consultation
• PPF publishes new guide for trustees on planning for insolvency
• TPR warns schemes to comply with law on chair’s statements

GMP equalisation – DWP guidance published on using conversion legislation

On 18 April 2019, the Government published its long awaited guidance on using the GMP conversion legislation to help crack the GMP equalisation conundrum. The culmination of work carried out by the DWP’s industry working group over the last few years, the guidance follows on from the High Court’s confirmation in the Lloyds case that benefits do need to be equalised for the effect of GMPs.

Among other things, the guidance sets out the following key points:

• the duty to equalise for the effect of GMPs only applies in respect of GMPs accrued on and from 17 May 1990 up to and including 5 April 1997, ie from the date of the Barber decision to the day before GMPs were abolished
• back in 2013, the DWP established an industry working group tasked with considering whether and how the GMP conversion legislation “might be used to equalise scheme benefits for the effects of unequal GMPs, and to seek a solution that would allow schemes to provide equal benefits but without imposing overly onerous burdens”
• whilst the legislative facility for converting GMPs into ordinary scheme benefits has been in force since 6 April 2009 (under the Pensions Act 2007), it has been rarely used in practice
• the guidance includes a 10-stage process for adjusting benefits to compensate for GMP inequalities and converting those benefits into ordinary scheme benefits, as well as a brief Q&A section.

For further detail, please see our Alert.

CMA market study: final report published

On 18 April 2019, the CMA published its final report into the UK statutory audit market. This follows the publication of its proposed remedies and recommendations in December 2018.

As the market study found “serious competition problems”, the CMA makes four recommendations to Government, including:

• operational split between the “Big Four’s” audit and non-audit businesses, with separate management and accounts
• a mandatory joint audit system, with “Big Four” firms working in collaboration with a non-Big Four firm on an audit
• “robust regulatory oversight of the committees that run the selection process for audited companies, and oversee the audit, to make them more accountable and ensure that they prioritise quality”, and
• a five-year review of progress.

The Government has 90 days to respond to the recommendations.

FCA publishes 2019/20 business plan and levy consultation

On 17 April 2019, the FCA published its Business Plan for 2019/20, which outlines the regulator’s key priorities for the coming year.

Its specific priorities for pensions include: addressing the remedies from the Retirement Outcomes Review; assessing competition in the non-workplace pensions market; maintaining action on improving DB transfers; further focus on the joint priority work with TPR; proposals on IGC effectiveness; and working with partners on the pensions dashboard.

At the same time, the FCA published its annual consultation on the proposed 2019/20 regulatory fees and levies, which fund the FCA and bodies such as MAPS. Any comments should be received by 29 May 2019. The response and final fee rates and levy rules are due to be published in a Policy Statement in early July 2019.

PPF publishes new guide for trustees on planning for insolvency

On 16 April 2019, the PPF published a new guide for trustees, Contingency planning for employer insolvency, to help them understand the challenges they may face where there is a risk of their employer becoming insolvent. The PPF worked closely with TPR to create the guidance, and note that it should be read together with TPR’s own guidance for managing DB schemes.

Sue Rivas, the PPF’s Director of Scheme Services stated that the guidance “gives information about the simple but effective steps we recommend trustees put in place to mitigate some of the risks resulting from employer distress”, particularly those areas which affect members and risk delaying completion of the PPF’s assessment period.

TPR warns schemes to comply with law on chair’s statements

Today, 23 April 2019, TPR issued a press release warning trustees that they must produce a legally-compliant chair’s statement. This follows fines against two schemes being upheld by the First-Tier Tribunal, after their trustees failed to include the required information in their annual statement.

The judges on both tribunal cases agreed that penalties for non-compliance were mandatory, the chair’s statements were non-compliant with the law, and that TPR was right to issue the fines.

Nicola Parish, Executive Director for Frontline Regulation at TPR, said “As these cases clearly demonstrate, we are prepared to defend our penalties in court. We continue to expect high standards of trustees and will take action when chair’s statements are not compliant with the law.”