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

• Finance Bill 2019-20: Changes to protect tax in insolvency cases
• Pensions Ombudsman Service annual report and accounts 2018 to 2019
• TPR annual report and accounts 2018 to 2019
• TPR: Investigations launched into shape-shifting employers that try to dodge pension duties
• TPR launches new re-enrolment tool
• TPR Statement on single code of practice
• Employer Covenant Practitioners Association: “it’s vital that DB covenant assessments consider potential implications of climate change on sponsors’ businesses” 
• Call for evidence: Financial Services Future Regulatory Framework Review
• Government announces that McCloud case will affect all public service pension schemes
• PASA publishes GMP Equalisation Call to Action
• PPI: Living through later life
• Langford v The Secretary of State for Defence

Finance Bill 2019-20: Changes to protect tax in insolvency cases

The order of priority in insolvencies is governed by the Insolvency Act 1986. Preferential debts are paid after fixed charges and the expenses of the insolvency, but before the holders of floating charges and all other unsecured creditors.

The draft Finance Bill includes provisions which will amend insolvency legislation, with effect from 6 April 2020, to move HMRC up the creditor hierarchy for the distribution of assets. It will become a secondary preferential creditor in respect of certain tax debts (such as VAT and PAYE income tax) held by a business on behalf of their customers and employees. This change aims to enable more of those taxes paid in good faith to go to fund public services, as intended.

If enacted, this measure will impact occupational pension scheme trustees’ ranking on an insolvency and therefore the amount they may ultimately recover.

Pensions Ombudsman Service annual report and accounts 2018 to 2019

On 18 July 2019, TPO published its annual report and accounts which explains the service’s activities and finances for the year 2018 to 2019.

This is the first annual report to include the work of the “Early Resolution Team” which joined TPO from TPAS in March 2018. As well as its usual investigations, TPO now deals with all early resolution disputes, bringing nearly all pensions dispute resolution under one roof.

Key facts and figures:

• TPO completed 1,268 investigations and resolved 2,165 early resolution cases
• the most common reasons for not taking on an investigation were that the complaint was not made within the time limits, the complaint was not raised with the parties, or that the topic was outside of TPO’s jurisdiction
• the most common topics of completed investigations were failure to provide information or to act on instructions, transfers (general issues around calculation of transfer values, or delays in payment) and the incorrect calculation of benefits
• the average time to complete new investigations was 5.3 months.

TPR annual report and accounts 2018 to 2019

On 18 July 2019, TPR published its annual report and accounts. The report highlights actions taken during the year, which included:

• use of frontline powers jumped a third
• cases increased by a quarter
• trustee appointment powers were used 593 times, up 11% on last year
• an increase of more than a third of fines issued for automatic enrolment non-compliance (translating into 49,032 fines).

TPR: Investigations launched into shape-shifting employers that try to dodge pension duties

On 17 July 2019, TPR announced that it has become aware of a number of employers that appear to have tried to conceal their failure to comply with the law by hiding behind a new name.

TPR investigators are now working with their counterparts at the Insolvency Service and other agencies to take action against offenders that try to use this ploy. Among the offences that may have been committed are fraud, theft and wilfully failing to comply with the automatic enrolment laws.

TPR is currently carrying out short-notice inspections on employers across the UK that are suspected of breaching their automatic enrolment duties.

TPR launches new re-enrolment tool

On 16 July 2019, TPR announced that employers will be able to re-enrol their staff into a workplace pension more simply following the launch of a new online resource.

TPR Statement on single code of practice

Last week, TPR announced that over the next year it will be reviewing its codes of practice to reflect the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018 (which were designed to implement the second European Pensions Directive, better known as IORP II, see our Alert). It expects that this will involve combining the content of its 15 current codes of practice to form a single, shorter code.

In doing so, TPR intends to make the codes of practice “quicker to find, use and update”, so that trustees and managers of all types of scheme can be more responsive to changes in regulation. Its current intention is to develop the new code in phases, with its early focus being on the codes most affected by IORP II (Code of Practice 9 (internal controls) and 13 (defined contribution code), plus content from Codes of Practice 14 (public service schemes) and 15 (master trusts)).

Trustees will need to be able to demonstrate that they have an effective system of governance within 12 months of publication of the updated code.

TPR intends to launch a formal consultation later in the year but, before that, will engage with stakeholders for feedback on the proposed design and content.

Employer Covenant Practitioners Association: “it’s vital that DB covenant assessments consider potential implications of climate change on sponsors’ businesses”

On 17 July 2019, the Employer Covenant Practitioners Association issued a press release encouraging practitioners in its member firms to make sure they consider fully the implications of climate change in their work and for sponsors and pension trustees to give proper consideration to such matters in their deliberations.

Specifically, it is guiding practitioners to comment on potential transitional risks if these are relevant and, where practical and appropriate, physical risks such as weather events.

Call for evidence: Financial Services Future Regulatory Framework Review

On 19 July 2019, HMT issued a call for evidence seeking views on regulatory coordination in the financial services sector.

This is the first phase in a number of planned interventions by HMT to determine the long-term effectiveness of the regulatory regime. It will look at whether more can be done to better coordinate the work of each regulator and to limit unnecessary burden. The wider review will then take stock of the overall approach to regulation of the financial services sector, including how the regulatory framework may need to adapt in the future, in particular when the UK leaves the EU.

The consultation closes on 18 October 2019.

Government announces that McCloud case will affect all public service pension schemes

On 15 July 2019, the Chief Secretary to Treasury confirmed that remedies relating to the McCloud judgment (in light of the Court of Appeal’s conclusions that transitional provisions put in place as part of reforms to the Judicial and Firefighters’ Pension Schemes amounted to direct unlawful age discrimination) will need to be made in relation to all public service pension schemes.

The matter will be remitted to the Employment Tribunal to determine a remedy. Alongside this process, the government will be engaging with employer and member representatives, as well as the devolved administrations, to help inform its proposals to the Tribunal and in respect of the other public service pension schemes.

Initial estimates suggest remedying the discrimination will add around £4bn per annum to scheme liabilities from 2015.

PASA publishes GMP Equalisation Call to Action

On 16 July 2019, the cross industry GMP Equalisation Working Group published its “Call to Action”. The group, which is chaired by PASA, has identified three initial areas that it urges schemes to start working on now:

• understanding and progressing GMP reconciliation and rectification
• reviewing the quality of the data needed for GMP equalisation
• managing impacted transactions (ie transactions which need to be completed now but, if the scheme still has not equalised for the effects of GMPs, may need to be revisited as part of an equalisation project).

The group intends to follow up the Call to Action with a guidance paper on the relationship between GMP rectification and equalisation. Later this year, the first version of full guidance documents for Data, Impacted Transactions, Methodology, and Tax are due to be issued.

For help with kickstarting your GMP project, please speak to your usual Sackers contact.

PPI: Living through later life

On 17 July 2019, the PPI published “Living through later life”. The report is sponsored by Age UK, the DWP, The People’s Pension and WEALTH at work.

As the average length of retirement has increased, alongside life expectancies, there is generally more variation in the experiences people will face over the course of later life. This report explores the range of experiences older people may face and how these are likely to evolve as health declines precipitate transitions between the three phases of later life (“the Independent Phase”, “the Decline Phase” and “the Dependent Phase”).

The report is the first in a series of two. The second, due to be released later in 2019, will explore the ways in which government and industry could support people in achieving more positive later life outcomes.

Langford v The Secretary of State for Defence

On 17 July 2019, the Court of Appeal unanimously held that a rule in the armed services pension scheme which prevented the surviving partner of a deceased member receiving a pension because she remained married to another person was unlawful discrimination, contrary to Article 14 of the European Convention on Human Rights.

For further details, please see our case report