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 announces appointment of expert advisory group to automatic enrolment review
• DWP publishes automatic enrolment consultation and draft Regulations
• FCA discussion paper on illiquid assets and open-ended investment funds
• HMRC publishes draft legislation on the pensions advice allowance
• House of Commons Library Briefing papers published
• PPF publishes revised Statement of Investment Principles
• PPF releases updated compensation cap factors
• PPI publications
• TPR blogs on “protecting pensions when a business goes bust”
• Work and Pensions Committee responds to consultation on corporate governance
• In the matter of an application by Denise Brewster for Judicial Review (Northern Ireland)

DWP announces appointment of expert advisory group to automatic enrolment review

On 8 February 2017, the DWP gave further details of its 2017 review into automatic enrolment (announced in December 2016), and published the Advisory Group’s terms of reference.

The review will consider the success of automatic enrolment to date and explore ways in which it can be further developed, looking at the themes of coverage, engagement and contribution levels.

The three Chairs of the external Advisory Group supporting the review will be Ruston Smith, Trustee Director at The Peoples’ Pension; Jamie Jenkins, Head of Pensions Strategy at Standard Life; and Chris Curry, Director of the PPI.

The review will look to ensure that workplace pensions continue to meet the needs of individual savers, and employers, while remaining fair, affordable and sustainable for future generations. It seeks answers to its initial questions on the main themes of the review by 22 March 2017, and aims to publish a final report “towards the end of the year”.

DWP publishes automatic enrolment consultation and draft Regulations

On 10 February 2017, the DWP published a consultation on proposed technical changes that are intended to simplify the automatic enrolment process and reduce burdens on employers.

This consultation seeks views on regulations (the draft Employers’ Duties (Implementation) (Amendment) Regulations 2017) which are designed to make two changes to the automatic enrolment process. The changes, for new employers due to become subject to automatic enrolment duties during 2017, are:

• a change to the automatic enrolment duties trigger for these new employers (known as post-staging employers) to provide certainty about when the AE duties will apply
• extend an existing compliance easement to these employers, giving them the option to defer automatic enrolment for their workers (currently this is available only to employers in the staging profile).

The draft regulations amend the existing Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 and the Employers’ Duties (Implementation) Regulations 2010.

The consultation closes on 3 March 2017. The Government aims to publish a response to the consultation during the remainder of March 2017, with the regulations due to come into force on 1 April 2017.

FCA discussion paper on illiquid assets and open-ended investment funds

On 8 February 2017, the FCA published a discussion paper which seeks views on the practice of investing in illiquid assets through open-ended funds, and the challenges that can pose to managers and investors. Open-ended funds can receive significant inflows from institutional investors who are managing money on behalf of others, such as pension schemes.

The FCA seeks feedback by 8 May 2017.

HMRC publishes draft legislation on the pensions advice allowance

On 7 February 2017, following publication of HMT’s response to the consultation on the pensions advice allowance, HMRC published the draft Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017, together with a draft Explanatory Memorandum. The Regulations provide for a pension advice allowance payment to be an authorised payment for the purposes of the Finance Act 2004, and set out the conditions which must be met.

It also published a Tax Information and Impact Note on the subject.

House of Commons Library Briefing papers published

On 6 February 2017, the House of Commons Library published a briefing paper looking at the arrangements for index-linking GMP rights for people reaching State Pension age before and after 6 April 2016, and for members of public service pension schemes, including reference to the current consultation.

It also published a briefing paper on 7 February 2017, looking at the law providing for the co-ordination of state pension entitlement within the EU, and the possible impact of Brexit.

PPF publishes revised Statement of Investment Principles

On 3 February 2017, the PPF published a revised Statement of Investment Principles which outlines the principles and policies governing determinations about investments made by or on behalf of the PPF Board in the management of the Fund’s assets.

PPF releases updated compensation cap factors

The PPF compensation cap is used to determine the level of compensation payable by the PPF to certain individuals. It is subject to an annual review with effect from 1 April to reflect the increase in the general level of earnings in Great Britain since the previous tax year.

On 10 February 2017, the PPF released updated age-specific compensation cap factors. These should be used for calculations of PPF compensation, as well as for valuations under section 143 (used to determine whether a scheme should enter the PPF following an insolvency event) and section 179 (a scheme’s funding position on the PPF basis) with effective dates from 1 April 2017.

PPI publications

The PPI have released a series of publications.

Briefing Note 88, “Have pensioners’ incomes grown in this period of austerity?” was published on 6 February 2017. It examines the variation of the changes to income for different groups of pensioners between 2007-08 and 2014-15, and assesses some of the factors that account for these changes.

Briefing Note 89, published on 13 February 2017, addresses “Defined Benefits: The role of Governance“. The Briefing Note, the second in the PPI’s new DB series, explores the role that is played by trustees in ensuring that schemes are well run and, as far as is possible, deliver in full the benefits accrued to members. The note explores:

• the role of DB pension scheme trustees
• the benefits of good governance and examples of good practice
• the current gap between good and poor governance
• the relationship between scale and governance, and
• what might come next, in terms of developing governance standards.

Briefing Note 90, “What is the best measure of how long people might live?” (published on the same date), discusses the construction of different estimates of life and healthy life expectancies, as well as their strengths and weaknesses.

Finally, Briefing Note 91, also published on 13 February 2017, on “How long will people spend in receipt of the State Pension?”, discusses expected lifespans spent above SPA. It considers the life expectancies of current and future retirees and the proportion of adult life individuals may spend in receipt of the State Pension.

TPR blogs on “protecting pensions when a business goes bust”

TPR has published a blog discussing situations where an employer is at risk of insolvency, focussing on the circumstances in which TPR will use a Regulated Apportionment Arrangement (“RAA”).

The blog, by TPR CEO Lesley Titcomb, considers the criteria that TPR expect to be met before they agree an RAA proposal, the factors that TPR takes into consideration, and its decision making process.

Work and Pensions Committee responds to consultation on corporate governance

On 12 February 2017, the Work and Pensions Committee published its response to the Government’s consultation on corporate governance reform, to be read alongside its “more substantial recommendations on pension law and regulation” in its December 2016 Report.

The response states that the corporate governance and reporting requirements for public listed companies should be extended to private companies that have an important social impact, including those with over 5,000 DB pension scheme members.

It also says company directors should have a new duty to pension fund trustees, as the representatives of pension scheme members, in addition to those stakeholders they are already obliged to have regard to. The WPC states that “incomes of pensioners in retirement are reliant on the sustained success of the sponsoring company but they are at particular risk of being neglected in corporate decision making. The inclusion of pension scheme trustees […] may increase the chances both that directors would take into account the interests of current and future pensioners in carrying out their duties and that those who have failed to do so will be held accountable in the courts”.

In the matter of an application by Denise Brewster for Judicial Review (Northern Ireland)

In this case, the Supreme Court allowed an appeal from the Northern Ireland Court of Appeal, holding that a provision relating to survivors’ pensions discriminated against cohabiting unmarried couples, was not justified and should be disapplied.

For further detail, please see our case report.