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:
- Draft auto-enrolment regulations laid before Parliament
- FCA publishes Transition Management Review
- HMRC issues revised guidance note on IP14
- TPR provides new tools help trustees to demonstrate DC scheme quality
Draft auto-enrolment regulations laid before Parliament
A draft of the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2014 has been laid before Parliament.
Currently a pension scheme which provides for benefits calculated based on average salary is excluded from being a qualifying scheme for auto-enrolment purposes if the scheme does not revalue the benefits of members whilst in pensionable service by a minimum rate. Revaluation ensures that individual’s pensions are not eroded by the effects of inflation. These regulations are intended to give schemes greater flexibility in the ways in which they can provide for this minimum level of revaluation and so not be excluded from qualifying.
In addition, an employer which provides a hybrid pension scheme and which certifies the DC benefits in the scheme against one of the alternative sets of requirements is currently unable to phase in employer and total contributions in respect of those DC benefits. These regulations make changes to ensure that an employer providing such a scheme is put on a level footing with one providing a “pure” DC scheme.
The regulations are intended to come into force on 1 April 2014.
FCA publishes Transition Management Review
On 10 February 2014 the FCA published the findings from its review of firms providing transition management (TM) services in the UK.
The review:
- looked at how firms move investment portfolios between different managers and markets for asset owners (such as pension funds)
- explored the size of the market and the business models carried on
- looked at the levels of oversight, governance and controls within the firms conducting TM.
Key findings were:
- Scale of TM industry – TM is an important service for asset owners. Over £165bn of assets is moved annually via around 700 mandates.
- Complexity of TM – It can be a complex and fast-paced form of business and that complexity (including potential conflicts of interest) needs careful management.
- Regulatory obligations are clear – the FCA’s existing rules and guidance set a high standard and no changes are necessary.
- Oversight and governance can be limited – TM is often a small part of a firm’s business and can sometimes be overlooked by control functions and senior management.
- Transparency – the FCA found deficiencies in transparency and communication at some firms.
As regards next steps, the FCA expects firms:
- to be vigilant in monitoring the application of controls to meet their obligations
- to ensure all potential conflicts of interest are understood, managed and mitigate
- senior management teams to ensure appropriate controls and oversight of transition management
- to review and ensure communications with customers are clear, fair and not misleading
- to work with customers to ensure communication requirements are understood.
It intends to follow up with individual firms to ensure ongoing compliance with regulatory obligations.
HMRC issues revised guidance note on IP14
On 7 February 2014, HMRC issued a revised guidance note on IP14.
For further details on this new form of transitional protection from the LTA, please see our Alert.
TPR provides new tools help trustees to demonstrate DC scheme quality
TPR’s DC code of practice and regulatory guidance were launched in November 2013. They set out the quality features TPR expects all DC schemes to possess. (For further details please see our Alert.)
To demonstrate that their scheme exhibits these quality features, TPR expects trustees to publish a governance statement. This statement should be made easily available to members and employers, for example, it may be published in the scheme’s annual report and accounts, or on its website.
The governance statement should be used to:
- Confirm that the scheme complies with the requirements of TPR’s DC code of practice, guidance and in particular that it exhibits the quality features.
- Explain where the scheme has adopted a different approach where a quality feature is absent or partly in place.
- Set out what action the trustees intend to take to correct the position where a feature is absent or to improve an existing feature.
To help trustees to complete the governance statement accurately, TPR has also published a template to enable them to assess their scheme against the quality features. The template, which can be adapted according to individual scheme needs, can also be used to monitor plans to improve scheme features to a ‘best practice’ or ‘exemplar’ level.
The assessment template is intended as a tool to help trustees and does not need to be published. However, TPR would expect the information to be available to employers, members and itself, upon request, to show how the trustees meet the quality features.
TPR notes that trustees may prefer to use other ways to evaluate their scheme. We offer a Gap Analysis Service which provides trustees with a detailed framework for assessing their compliance with the DC Code and guidance. If you are interested in using this service please speak to your usual Sackers’ contact.
+44 (0)20 7329 6699
enquiries@sackers.com
20 Gresham Street, London, EC2V 7JE - 
