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

• New legislation published
• Further McCloud changes proposed, and guidance published
• Consultation on enabling investment in productive finance (charge cap and performance fees)
• FCA publishes stronger nudge rules
• FCA compensation review
• HMRC pension schemes newsletter 135
• PPF publishes updated valuation guidance documents
• PPF makes progress on implementing court ruling
• TPR adds first DB superfund to list

New legislation published

The State Pension Debits and Credits (Revaluation) Order 2021 and State Pension Revaluation for Transitional Pensions Order 2021 were laid before Parliament on 30 November 2021. These instruments revalue certain components that may form part of an award of new State Pension for persons reaching State Pension Age from 12 April 2022.

Further McCloud changes proposed, and guidance published

On 30 November 2021, the Department for Education published a consultation on proposed changes to the teachers’ pension scheme following on from the judgment in McCloud. The consultation closes on 24 January 2022. As with other public sector schemes (see 7 Days), a further consultation will be held next year with regards to the remainder of the McCloud remedy.

The Home Office has also updated technical guidance for processing certain police pension scheme immediate detriment cases as part of the McCloud and Sargeant litigation. “Immediate detriment” refers to those who have already retired or will do so before the remedy to the discrimination is implemented. The note replaces guidance which has been withdrawn, and sets out HMT’s “best assessment at this point” on the advisability of processing immediate detriment cases before new legislation to enact the McCloud remedy is in place (see 7 Days).

Consultation on enabling investment in productive finance (charge cap and performance fees)

On 30 November 2021, the DWP published a consultation on “Enabling investment in productive finance”.

Key points to note are as follows:

• the Government is proposing to include “well-designed performance fees that are paid when an asset manager exceeds pre-determined performance targets” to the list of charges excluded from the charge cap. It believes that this will address the problem that variable fees (such as performance fees) are not suitable for regulation through a flat cap
• should the above change go ahead, the smoothing mechanism introduced in October 2021, with the aim of enabling investments in assets attracting performance fees (see our Alert) will be removed
• a further consultation on draft regulations will probably take place “early next year” with the aim of bringing the above changes into force in October 2022
• the consultation notes that the “Government will be introducing several initiatives to meet its commitment to shift the focus of DC schemes’ investment strategies away from cost and move towards overall value, including opening up private markets to DC savers”. No further detail is available at this stage.

The consultation closes on 18 January 2022.

FCA publishes stronger nudge rules

On 1 December 2021, the FCA published final rules requiring firms to implement the “stronger nudge” to Pension Wise guidance. From 1 June 2022, when customers decide to access their savings, providers of personal and stakeholder schemes will be required to refer them to the Pension Wise service, explain the purpose of Pension Wise guidance, and offer to book an appointment.

The DWP is working on corresponding rules for occupational schemes, which are currently due to come into force in April 2022.

FCA compensation review

On 6 December 2021, the FCA published a Discussion Paper aimed at “maintaining a compensation framework that provides appropriate protection for consumers, funded in a fair and sustainable way”. The Paper asks questions about the levels of, and levies in respect of, FSCS compensation, which covers among other things claims relating to negligent advice in respect of transfers from DB pensions and to SIPPs. The FCA asks for responses by 4 March 2022.

HMRC pension schemes newsletter 135

HMRC published pension schemes newsletter 135 on 30 November 2021. Amongst other things, it has articles on relief at source notifications of residency status, pension scheme migration, and the interaction of members declaring annual allowance charges via Self-Assessment with Scheme Pays.

PPF publishes updated valuation guidance documents

The PPF has published new versions of various valuation guidance documents, including guidance in respect of valuations under s143, 152, 156 and 179 of PA04. These updates allow for the Bauer and Hampshire court judgments, and make other general tidying changes. The new versions of the valuation guidance documents and information notes come into effect on 1 December 2021. Schemes and advisors in the process of carrying out s143, s152 or s156 valuations under an earlier version of the relevant guidance should discuss the approach with their usual PPF contact.

The PPF has also updated the information note “Additional information for carrying out a section 143 valuation”, and published a new note “Information for valuing benefits in respect of the Hampshire, Hughes and Bauer judgments in a section 143 valuation”. The two notes are relevant to s143, s152 or s156 valuations with an effective date on or before 1 December 2021, and therefore under previous versions of the guidance.

PPF makes progress on implementing court ruling

On 2 December 2021, the PPF issued a further update on its work to implement the Hampshire ruling, which declared the PPF’s compensation cap unlawful. The PPF states that it has paid arrears (ahead of its target of the end of the year) due to the Financial Assistance Scheme (“FAS”) pensioners who had already received a Hampshire increase. In addition, it no longer applies the cap to new PPF retirees, and it has now started the process to remove the compensation cap.

Sue Rivas, PPF Director of Scheme Services, confirmed that it is likely to take until the end of 2022 before the PPF is able to disapply the cap for the majority of currently capped pensioners.

The PPF still needs to finalise whether a six-year time limit will apply to arrears payments. It is continuing discussions with the DWP on this point, and hopes to have more information and to make an announcement on this soon.

TPR adds first DB superfund to list

The first DB consolidation vehicle (or “superfund”) has met TPR’s requirements and been added to a new online list. The list will include those superfunds which have been assessed by TPR and have demonstrated that they meet several criteria, including good governance, being run by fit and proper people, and being backed by adequate capital.

TPR launched its interim regime for superfunds and other new models in June 2020, ahead of proposed Government legislation. In October 2020, TPR then published guidance for trustees and employers considering a transfer to a superfund.