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
• CTI launches additional tools and guidance for institutional investors
• MAPS and dashboards update
• European Parliament – criteria for sustainable investments
• Updated HMRC and TPR guidance on CJRS
• Court ruling on PPF compensation cap and increases methodology
• TPR launches interim regulatory regime for Superfunds
• TPR issues updates on easements
• TPR updates COVID-19 guidance suite
• WPC publishes report on DWP’s response to COVID-19

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.

CTI launches additional tools and guidance for institutional investors

On 19 June 2020, the Cost Transparency Initiative (“CTI”) published additional resources aimed at helping institutional investors better understand their investment costs. This follows the publication of its framework of tools and guidance in 2019 (see 7 Days).

The CTI framework (a joint initiative between the PLSA, the Investment Association and the LGPS Advisory Board) encourages pension schemes and asset managers to adopt the standards. The new tools and guidance include a new Fiduciary Management Template, and additional reporting fields on the Liability Driven Investments Template.

MAPS and dashboards update

On 22 June 2020, the newly formed Pensions Dashboards Programme (“PDP”), set up by MAPS, launched its website. It announced the start of a period of “informal market engagement with potential suppliers of the digital architecture for the pensions dashboards ecosystem”, to determine the technology requirements before commencing a formal procurement process “later this year”.

An industry-wide call for input on data standards (examining the reports on data scope and definitions published in April – see 7 Days), will then run throughout July and August.

MAPS has also published its corporate plan for 2020/21, outlining the organisation’s strategic priorities (which include “developing and implementing pensions dashboards”), and its immediate response to the coronavirus outbreak. The plan was due to be published at the beginning of April 2020, but had been delayed to allow a review of how MAPS’ priorities would be “flexed” in response to the pandemic. Its priorities will continue to evolve as the COVID-19 situation unfolds.

European Parliament – criteria for sustainable investments

On 18 June 2020, the European Parliament published a press release announcing that it had adopted the regulation on the establishment of a framework to facilitate sustainable investment (referred to as the Taxonomy Regulation). The regulation will enter into force 20 days following publication in the Official Journal of the EU.

On 17 June, John Glen, Economic Secretary to the Treasury, wrote to Sir William Cash, Chair of the House of Commons European Union Committee, on the Taxonomy Regulation. The letter confirms that, given the timing of its coming into force (during the EU Exit implementation period), the UK will retain the taxonomy framework, including its high-level environmental objectives. However, as its disclosure requirements only apply after 31 December 2021, they will not form part of retained EU law. It is not yet confirmed to what extent the UK will align with the EU after the implementation period (as delegated technical standards are yet to be published by the European Commission, meaning the UK does not “have clarity on the final outcome”). The Government will continue to monitor the legislative process as it considers the UK’s approach to green finance standards.

Updated HMRC and TPR guidance on CJRS

The Government updated its CJRS advice (Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme and Check if your employer can use the Coronavirus Job Retention Scheme) on 19 June 2020, adding information about exceptions for military reservists.

In addition, alongside the changes to its automatic enrolment and DC contributions guidance (see 7 Days), TPR also updated its DC pension contributions: COVID-19 technical guidance for large employers, to include reference to members of staff working part-time during of the furlough period (which is permitted from 1 July 2020).

Court ruling on PPF compensation cap and increases methodology

On 22 June 2020, the PPF issued a press release stating that the High Court has ruled on the challenge brought against it following the CJEU’s ruling in Hampshire.

In brief, the court has ruled that:

• the PPF compensation cap is unlawful on grounds of age discrimination
• the PPF’s approach of making a one-off calculation is permissible, if it meets set criteria
• members of schemes in assessment should receive benefits at the level required by the Hampshire judgment.
• affected members can seek to recover arrears for a period of up to six years.

The case concerned pensioner members below their scheme’s NPA at the time of PPF assessment (and did not examine whether this should apply equally to the cap on compensation in respect of non-pensioner members).

The PPF states that it is studying the detail of the judgment carefully to decide its next steps, and that it will work closely with the DWP to understand how the Government will respond (as the Government sets PPF compensation cap levels). In the interim, the PPF will continue to pay its members their current level of benefits.

For further detail, please see our forthcoming case report.

TPR launches interim regulatory regime for Superfunds

On 18 June 2020, TPR launched a new interim regulatory regime for DB consolidator superfunds (and other new models), pending the establishment of a full legislative framework by the DWP. The new guidance, which came into effect immediately, establishes the “high bar” TPR expects new superfunds to meet to ensure both savers and the PPF are adequately protected.

The guidance is intended to cover how trustees of a superfund’s pension scheme should approach managing the funding and governance risks associated with this model. It also explains how they will be assessed and regulated.

Updates to TPR’s separate guides for trustees and employers contemplating a move to a superfund will follow, but TPR is clear that every such transfer must go through its clearance process.

See our Alert for full details.

TPR issues updates on easements

On 16 June 2020, TPR issued updated guidance on reporting duties and enforcement activity. The updated guidance outlines how TPR is “continuing to support schemes in these challenging times.” Decisions on regulatory action will continue to be made on a case-by-case basis and taking “a flexible and pragmatic approach where breaches are COVID-19 related”. However, from 1 July, the guidance asks trustees to resume reporting certain key information to TPR to ensure risks are being managed and savers protected.

TPR expects trustees to report details in certain areas, including:

• suspended or reduced contributions – TPR expects trustees to submit a revised recovery plan or a report of missed contributions
• late valuations, and where recovery plans are not agreed
• delays in CETV quotations and payments
• failure to prepare audited accounts.

In relation to other key areas:

• late payments – the one exception to the return to business as usual on reporting. TPR will continue to give DC and automatic enrolment providers 150 days to report late payments of contributions (rather than the usual 90 days). This will be reviewed again at the end of September 2020 (as the results of the 150-day reporting period would not be seen until that time)
• transfers – trustees should continue to issue a template letter to all members requesting a CETV quote, and monitor requests for concerning patterns. Trustees who identify unusual or concerning patterns should contact the FCA on DBTransferSchemeInformation@fca.org.uk
• annual benefit statements – TPR is continuing to take a pragmatic approach to these, accepting that the impact of COVID-19 means schemes need additional time to issue them to members. However, schemes should still “look to” providing members with a timescale as to when they would expect statements to be issued
• accounts – trustees will be asked to report any failure to prepare audited accounts, but TPR will not be looking to take enforcement action on late accounts signed off by 30 September 2020
• chair’s statements – the legislation around chair’s statements does not allow discretion in relation to enforcement (although included in the annual report and accounts, chair’s statements can be prepared and signed off separately so that they remain on time). TPR also notes that it does not expect to be reviewing statements before the autumn. Chair’s statements it receives before then (including in relation to master trusts) will be returned unread, but this should not be taken as an indication that the statement in question complies with TPR’s requirements
• master trusts – from 30 June 2020, master trusts should return to issuing a formal report to notify TPR of all triggering and significant events
• investment governance – TPR does not expect to take regulatory action if a review of a SIP (or statement in relation to any default arrangement) is not delayed beyond 30 September 2020.

TPR also notes that relationship-managed supervisory activity will continue to focus more on near-term risks, rather than the standard activities in its supervisory cycle during this period.

In a blog issued on the same day (Why intelligence is key to combating COVID), David Fairs (TPR Executive Director of Regulatory Policy, Analysis and Advice) looks at the key updates. He highlights the importance of schemes complying with reporting requirements from 1 July so TPR can understand “how COVID-19 is affecting [its] regulated community” and “scan the horizon for risks to savers”.

In relation to deficit repair contributions (“DRCs”), whilst TPR recognises the need for some deferrals to continue, it does not expect trustees “to unquestioningly extend their original suspension arrangements on a three-month rolling basis”. TPR expects trustees’ due diligence to now allow greater insight into an employer’s short-term liquidity than when COVID-19 lockdown began.

TPR updates COVID-19 guidance suite

On 16 June 2020, TPR also issued updates to the following COVID-19 guidance:

• DB scheme funding and investment: COVID-19 guidance for trustees – this has been given a “major rewrite” to consolidate previously published guidance, provide an update of TPR’s view of the impact of COVID-19, and to explain how it will continue to adapt its regulatory approach and “provide guidance for trustees dealing with difficult decisions”
• DB scheme funding: COVID-19 guidance for employers – this has been generally refreshed to ensure it is consistent with the updated trustee guidance
• Scheme administration: COVID-19 guidance for trustees and public service – the updated version includes additional information on maintaining services for potentially vulnerable members, and on “reducing the burden on administrators.”

WPC publishes report on DWP’s response to COVID-19

On 22 June 2020, the WPC published its report on the DWP’s response to the COVID-19 outbreak. The report notes that TPR “has needed to take a more flexible approach towards businesses’ pension duties, whilst fundamentally protecting the pension rights of workers. That flexibility is appropriate, but it must remain alert to the risks of abuse by unscrupulous employers. People facing financial hardship may also be looking at their pension savings as an extra form of support. It is important that these savers are protected from decisions not in their best interests and do not see their savings fall into the hands of opportunistic scammers.”