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

• ACA Pension Trends Survey 2017 – interim report
• CMA sets out scope of investment consultancy market investigation
• FCA publishes Policy Statement on transaction cost disclosure in workplace pensions
• Government response to BEIS Committee report published
• PLSA Stewardship Survey 2017
• TPAS launches Annual Review 2016/17
• TPR bans three trustees over pension liberation role
• Work and Pensions Committee launches investigation into pension freedoms

ACA Pension Trends Survey 2017 – interim report

The Association of Consulting Actuaries (“the ACA”) has released the first interim report from its Pension Trends Survey conducted over the summer amongst employers.

The findings include the following:

• 53% of those with DB schemes say the costs associated with their schemes have a negative impact on pay increases, with 80% saying there is also a negative impact on inter-generational equity
• 84% of those with DB schemes suggested that the law should be changed so that such schemes could reduce pension increases if continuing to provide increases at the level of scheme rules would “severely and adversely” affect the employer, with a majority favouring this being subject to an agreement with trustees
• 79% of those with DB schemes support increased punishments for those caught mismanaging schemes, with 68% in favour of new criminal offences for directors who “deliberately and recklessly” put a scheme’s ability to meet its obligations at risk
• 32% of employers felt consolidation of DB schemes was “generally a good thing” and that cost savings would be real; however, many respondents remained uncertain on the pros and cons of consolidation.

Further Interim Reports on the survey’s findings are due to be published in October 2017, with a final report due in November.

CMA sets out scope of investment consultancy market investigation

On 21 September 2017, the Competition and Markets Authority (“the CMA”) published a statement of issues giving detail on the areas that it proposes to examine as part of its investigation into investment consultancy.

As set out in the FCA’s terms of reference, the investigation will cover investment consultancy services which provide advice to institutional investors (mainly pension funds) and employers on their pension schemes, and fiduciary management services where the provider makes and implements decisions for the investor (for example, to select a fund in which to invest).

The CMA is now carrying out an independent investigation to see if there are any market features which prevent, restrict or distort competition. If it finds that there are competition concerns, the CMA will decide what action, if any, is needed to resolve them.

The CMA proposes to survey trustees of UK occupational pension schemes as part of its investigation.

Submissions in response to the investigation are invited by 12 October 2017.

FCA publishes Policy Statement on transaction cost disclosure in workplace pensions

On 20 September 2017, the FCA published Policy Statement 17/20, setting out the FCA’s final Handbook rules in relation to “Transaction cost disclosure in workplace pensions”. This follows the FCA’s October 2016 consultation paper which proposed rules and guidance to improve the disclosure of transaction costs in workplace pensions.

The amendments to the Handbook require firms managing money on behalf of DC workplace pension schemes to disclose administration charges and transaction costs to the governance bodies of those schemes, using a standard approach. The relevant governance bodies are Independent Governance Committees (“IGCs”) in respect of workplace personal pension schemes, and the trustees of occupational pension schemes. Where firms do not have the relevant information to disclose, they must seek it from other firms, and those other firms, where they are FCA authorised, must provide the information.

The rules come into effect from 3 January 2018.

Please see our forthcoming Alert for further detail.

Government response to BEIS Committee report published

On 22 September 2017, the House of Commons BEIS Committee published the Government’s response to its report on corporate governance which was published in April 2017.

The paper sets out the Government’s response to the Committee’s recommendations for corporate reform, which helped inform the recent response to the green paper consultation and the proposed package of legislative changes in the area.

PLSA Stewardship Survey 2017

The PLSA has published its updated stewardship survey, undertaken in partnership with the Investment Association (“IA”), the Institute of Chartered Secretaries and Administrators (“ICSA”) and the Financial Reporting Council (“FRC”). The survey examined pension funds’ stewardship practices, concluding that active stewardship of schemes’ investments – working with investee companies and asset managers to oversee and improve the strategy, governance, corporate culture, financial performance or environmental and social impact of those companies – can deliver better outcomes for pension fund members.

Respondents to the survey unanimously agreed that pension funds have stewardship responsibilities. Other key findings include:

• 76% of respondents agreed that ESG considerations are financially material to their investments
• 71% say they take stewardship factors into consideration when selecting their asset manager
• over half of respondents had taken steps to increase their stewardship activities in the past year.

Joe Dabrowski, Head of Governance and Investment at the PLSA, said “At the heart of this research is the simple message that communication is key to good outcomes for asset owners as well as asset managers. Workplace pension schemes have £1.9tn of assets under management in the UK and are therefore keenly interested in not just how an investment performs in the short term but its long-term value. The research highlights the steps that institutional investors are taking on an ongoing basis to ensure that high standards of stewardship are built and maintained.”

TPAS launches Annual Review 2016/17

TPAS has published its Annual Review 2016/17. Key figures from the report include:

• a 9% increase in customers to 205,400 (from 188,500 in 2015/16)
• 3.3 million website visits over the course of the year
• a cost per direct customer of £31 (£1.59 per customer if website visits are included) compared with £36 in 2015/16.

Ann Harris OBE, Chair of TPAS said “We are delighted that the Government has identified that there is a continuing need for public financial guidance, which is independent and impartial. We also support the three key principles on which the body will be designed: consumer focus, value for money and sustainability. As an organisation, TPAS will continue to deliver and develop its services so that today’s customers continue to be served. TPAS also pledges to work with the DWP “on the successful formation of the new Single Financial Guidance Body.”

TPR bans three trustees over pension liberation role

TPR released a determination notice on 19 September 2017 announcing that three people had been banned from acting as trustees of pension schemes over suspicions that millions of pounds were scammed from investors using schemes of which they were trustees.

The banned trustees had encouraged members of other schemes to transfer their pensions into the Milton and Carrick Harbour schemes, and then invested those funds in high-risk, unregulated investments in the UK and overseas without the members’ knowledge. Their names have been added to TPR’s register of prohibited trustees.

Mike Birch, TPR’s Director of Case Management, said “The trustees showed a disregard for their obligations resulting in scheme assets being gambled on high-risk investments that are now worth a tiny fraction of what was put into them. […] Savers have the right to expect trustees to manage their pension schemes effectively. Where trustees cannot or do not do this, we will take action to protect members’ benefits by replacing them and then, where appropriate, ensuring that they can no longer act as trustees.”

Work and Pensions Committee launches investigation into pension freedoms

On 20 September 2017, the WPC launched an inquiry into the extent to which the retirement freedoms have achieved their objectives and whether policy changes are needed. The work follows up the inquiry by the WPC shortly after the reforms were introduced in 2015.

The inquiry will examine how people are using their retirement savings, how they chose their paths, the information and guidance available, and the way the pension product market is working. The Committee is also keen to hear of people’s experiences with scams, and what might be done to prevent these.

Committee Chairman Frank Field said: “Pension freedom and choice liberated savers to choose what they wanted to do with their own money. This was welcome, but as with any radical reform it [is] important to monitor its practical effects closely to ensure it is working as envisaged. In this case it is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret.”

Written evidence may be submitted until 23 October 2017.

The House of Commons Library has updated its briefing paper Pension flexibilities: the ‘freedom and choice’ reforms to reference the inquiry.