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

DWP publishes Hybrid Schemes Quality Requirements Rules
DWP updates further state pension publications
Employer Covenant Working Group publishes guidance for DB schemes
EIOPA recommends transparency but halts work on pensions solvency requirements
Employment Tribunals: consultation on calculating pensions loss
HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out
House of Commons Library publishes updated briefing paper on LGPS investments
Pensions Ombudsman launches advice videos
TPR calls on trustees to prepare for changes to annual DC scheme return
TPR publishes DC “how to” guides for consultation
TPR corporate plan

DWP publishes Hybrid Schemes Quality Requirements Rules

On 12 April 2016, the DWP published The Hybrid Schemes Quality Requirements Rules 2016.

The rules, which came into force on 6 April 2016, set out the detailed quality requirements that a hybrid pension scheme must satisfy in order to be used for an employer’s automatic enrolment duties. The rules have been revised to remove references to contracting-out, which, before 6 April 2016 enabled schemes to qualify automatically as quality schemes for automatic enrolment purposes.

The new rules follow the publication on 29 March 2016 of new DWP guidance (see 7 Days dated 29 March 2016), which is designed to help pension scheme professionals decide whether a DB or hybrid scheme is of sufficient quality to be used for an employer’s automatic enrolment duties.

DWP updates further state pension publications

The DWP has updated further documents in the wake of the introduction of the new state pension on 6 April 2016. On 14 April 2016, it published a revised version of its:

These publications aim to help explain the changes to the state pension which came into effect on 6 April 2016.

Employer Covenant Working Group publishes guidance for DB schemes

The Employer Covenant Working Group (ECWG) launched a practical guide for advisers, trustees and sponsors of DB schemes on 11 April 2016. The guide covers principles of covenant assessment for scheme valuations and aims to provide guidance on some leading practice principles that underpin independent covenant assessments.

ECWG Chair Gary Squires said: “There are still 11 million people in 6,000 DB pension schemes in the UK […] these schemes collectively face a solvency deficit of some £800bn at present. Given the scale of the challenge it’s clear that there is a need for a consistent approach to addressing funding deficits and the members of the ECWG’s work assisting trustees, scheme sponsors and regulators in considering an employer’s ability to pay contributions into the future is vitally important to help secure the retirement of millions of people.”

EIOPA recommends transparency but halts work on pensions solvency requirements

On 14 April 2016, EIOPA published its opinion on a “common framework for risk assessment and transparency for intuitions for occupational retirement provision”.

“At this point in time”, EIOPA is not recommending the harmonisation of capital or funding requirements for pension schemes. It does, however, recommend the introduction of a new reporting regime which could run alongside existing funding requirements.

EIOPA proposes the adoption of “a standardised risk assessment to calculate the impact of common, pre-defined stress scenarios on the common framework’s balance sheet of a pension fund”. It envisages that the “common framework balance sheet” and “standardised risk assessment”, which are intended to replace EIOPA’s earlier concepts of the “holistic balance sheet” and “solvency capital requirement”, would be used for assessing risk valued on a market consistent basis. All available security and benefit adjustment mechanisms, such as sponsor support, pension protection schemes (such as the PPF) and benefit reductions would be recognised as part of this assessment.

EIOPA’s opinion, which is addressed to the EU’s co-legislators – the Commission, Parliament and Council – brings to a close nearly three years of work on pension scheme solvency which EIOPA has been carrying out at its “own initiative”.

Employment Tribunals: consultation on calculating pensions loss

On 31 March 2016, the President of the Employment Tribunals issued a consultation on the approach that the employment tribunals should adopt when assessing pensions loss.

A Working Group of employment judges produced the consultation in response to the need, identified by Lord Justice Underhill in the case of Griffin v Plymouth Hospital NHS Trust, to review the 2003 booklet “Compensation for Loss of Pension Rights: Employment Tribunals” in order to reflect recent changes in pension law and practice”.

The consultation closes on 20 May 2016.

HMRC issues latest “Countdown bulletin” on the abolition of DB contracting-out

On 13 April 2016, HMRC published issue 16 of its contracting out Countdown Bulletin, which provides further guidance for pension scheme administrators in relation to the end of contracting-out as of 6 April 2016.

Amongst other things, the bulletin covers further information on the GMP Checker service, and a reminder that schemes who had failed to register their interest in using the Scheme Reconciliation Service before 6 April 2016 may be able to be considered where there are “exceptional circumstances”.

House of Commons Library publishes updated briefing paper on LGPS investments

On 13 April 2016, the House of Commons Library updated a briefing paper which looks at the current debates around whether LGPS funds should pool their investments and whether more can be done to promote their investment in infrastructure. It includes reference to the announcements made in the Budget 2016.

Pensions Ombudsman launches advice videos

The Pensions Ombudsman Service has developed advice videos, which it unveiled on 12 April 2016. The videos are designed to help members of the public who are thinking of making a complaint to the PO, by explaining the process and illustrating the customer journey and complaints process.

TPR calls on trustees to prepare for changes to annual DC scheme return

TPR has today (18 April 2016), called on trustees to get ready to deal with changes in the DC scheme return or risk being fined for failing to comply with the law.

In a change from last year, schemes will be required to provide information about how they comply with the requirements brought in by legislation in 2015, including charge controls and scheme governance. To help trustees with the changes, TPR has produced a checklist guide about the new scheme return.

Revised scheme returns are due to be sent out by TPR from July this year.

TPR publishes DC “how to” guides for consultation

On 13 April 2016, TPR launched a consultation on a series of new guides aimed at helping trustees know “how to” implement the draft revised DC code. The new DC code will apply to occupational trust-based schemes which provide money purchase benefits and is due to come into force in July 2016.

The guides have been designed to support the new DC code, and set out ways in which trustees can show that they are complying with the law.

Consultation on the draft guides closes on 11 May 2016.

Please see our Alert for more details.

TPR corporate plan

TPR published its latest corporate plan on 14 April 2016, setting out what can be expected of it over the next three years.

TPR names its top ten priorities for 2016-2019 as:

successful implementation of automatic enrolment, with a particular focus on helping small and micro employers meet their automatic enrolment duties
protection of consumers from poorly governed master trusts. In conjunction with the ICAEW, TPR plans to develop a revised version of its master trust framework, reflecting the requirements of the new DC code which is due to come into force in July 2016
effective regulation of DB schemes, by continuing its risk-based approach to appropriate funding outcomes through proactive and reactive case interventions, as well as guiding trustees and employers through its expectations in current market conditions by way of the annual funding statement
effective regulation of public service pension schemes, including governance, record-keeping, internal controls and communications
maintaining confidence in pensions by mitigating the detrimental impact of scams through securing assets and disrupting scam activity
improving the quality of scheme governance by setting out what effective and contemporary trusteeship looks like and developing tools and guidance to support those running pensions
extending its regulatory influence by engaging on policy issues and developing appropriate standards
increasing member engagement with pensions by developing appropriate tools to help improve savers’ understanding of pensions
developing the TPR team through effective performance management and staff development
being an effective and efficient regulator, using data, information and technology to improve performance.