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

• Government and FCA report successful crackdown on older pension scheme charges
• FCA policy statement on FAMR implementation Part II
• FRC publishes consultation on update to UK Corporate Governance Code
• Money laundering – Trust Registration Service deadlines update
• HMT reports on renewed investment management strategy
• Spring Statement 2018 date confirmed
• OECD publications
• PASA announces DC Governance Working Group
• PLSA publishes “Made Simple” guide
• MIFID II top five actions for pension schemes published by PLSA
• PLSA issues guidance on climate change risk to pension funds
• Twelfth version of the Purple Book published
• WPC issues report into cold calling inquiry
• United Biscuits (Pension Trustees) Limited v HMRC (High Court, 30 November 2017)

Government and FCA report successful crackdown on older pension scheme charges

On 6 December 2017, the DWP and the FCA published an update on their work on lowering costs and charges in pensions schemes. According to their press releases, costs have been lowered on over £24.9bn of assets, for members of older workplace (or legacy) schemes, over the past four years. The update shows the improvements made since the FCA and the DWP published their joint report on Remedying Poor Value Legacy Workplace Pension Schemes in December 2016.

The Government and FCA state that they are continuing to work with a small number of remaining providers to eliminate high costs and charges by the end of 2018, but note that the DWP will legislate, if necessary. The FCA has written to all providers that participated in its review setting out its clear expectation that they will continue to ensure that customers are not exposed to high costs and charges that are poor value for money, and that they engage on an ongoing basis with their IGCs, trustees and members as appropriate to achieve this.

FCA policy statement on FAMR implementation Part II

On 8 December 2017, the FCA published a policy statement on Part II of its implementation of the recommendations made by the Financial Advice and Markets Review (“FAMR”) final report. This follows its consultation in August 2017 covering:

• Handbook changes arising from amendments to the definition of advice on retail investments
• the introduction of new guidance to support firms offering services that help consumers making their own investment decisions without a personal recommendation
• new guidance arising from experiences of the FCA’s Advice Unit
• guidance for firms on the treatment of “insistent clients”.

The policy statement contains the final Handbook rules and guidance, summarises the feedback it received in relation to the above, and indicates where it has adjusted its approach to take respondents’ views into account. The changes will take effect on 3 January 2018.

The policy statement includes a further consultation on retiring existing FCA guidance on inducements and conflicts of interest (FG14/1), and on independent and restricted advice (FG12/15). Any responses to the proposals should be submitted by 19 January 2018.

FRC publishes consultation on update to UK Corporate Governance Code

On 5 December 2017, the FRC published proposals for a revised UK Corporate Governance Code.

The proposed Code will be shorter, and aims to “reflect the changing business environment and help UK companies achieve the highest levels of governance”. It builds on the findings from the FRC’s Culture Report published in 2016, and focuses on the importance of long-term success and sustainability, addressing issues of public trust in business and aiming to “ensure the attractiveness of the UK capital market to global investors through Brexit and beyond”.

The revised Code is built on an updated set of Principles. By applying these Principles, following the more detailed “comply or explain” provisions and using associated guidance, the hope is that companies will be better able to report how their governance structure contributes to its long-term success and achieves wider objectives. The Code is supported by the revised Guidance on Board Effectiveness. The consultation also includes questions to inform the future direction of the UK Stewardship Code, specific changes to which will be published for consultation in late 2018.

Responses to the consultation should be submitted by 28 February 2018.

Money laundering – Trust Registration Service deadlines update

HMRC has recently confirmed that, following feedback from stakeholders, in the first year of operation only, HMRC will not impose a penalty on the trustees of taxable relevant trusts if trustees, or an agent acting on their behalf, fail to register on the Trust Registration Service by 31 January 2018 but do so no later than 5 March 2018.

Therefore, the deadlines for registration currently stand as follows:

• for trustees who first incurred a liability to income tax or capital gains tax in the tax year 2016/17, the deadline is 5 January 2018
• for all other trustees who need to make a report on the Trust Registration Service in respect of the tax year 2016/17, the deadline effectively stands at 5 March 2018.

Please see our Alert for further detail on the anti money-laundering regime.

HMT reports on renewed investment management strategy

On 6 December 2017, HMT published a report setting out the UK’s updated investment management strategy.

The report sets out the government’s long-term approach to enhancing the UK’s position as a centre for asset management. The stated objective is “to ensure that the UK asset management industry continues to thrive and delivers the best possible outcomes for consumers, businesses and the UK economy”.

The latest report follows the first strategy for the sector published in 2013, and aims to target a broader range of policy areas. It sets out the policy initiatives that the Government, in collaboration with industry and the FCA, will take forward to:

• enhance the government, regulator and industry dialogue
• maintain stable tax and regulatory environments
• strengthen the asset management domestic skills pipeline
• advance the development of asset management FinTech solutions
• support UK asset managers to be global leaders in developing innovative investment strategies (such as green finance and social impact investment)
• continue a coordinated programme of international engagement to attract overseas firms to locate in the UK and promote UK firms overseas.

Spring Statement 2018 date confirmed

HMT has confirmed that the Spring Statement 2018 will be published on Tuesday 13 March 2018.

Following the Chancellor’s announcement at the Autumn Statement 2016, there is now only one major fiscal event in each year, held in the Autumn. The Government has therefore also published updated guidance setting out how the tax consultation process will work.

This guidance sets out how “the timetable will allow for more opportunities for the government to consult with stakeholders at early stages of policy making”, including by launching consultations at the Spring Statement. The plans it sets out aim to give businesses and tax professionals more time to consider and adapt to upcoming changes ahead of the tax year in which they will take effect, and to give Parliament more time to scrutinise draft legislation ahead of the introduction of the Finance Bill.

OECD publications

The OECD has published its latest biennial report, Pensions at a Glance. The 2017 edition highlights the pension reforms undertaken by OECD countries over the last two years. This edition updates information on the key features of pension provision in OECD countries and provides projections of retirement income for today’s workers. It offers indicators covering the design of pension systems, pension entitlements, the demographic and economic context in which pension systems operate, incomes and poverty of older people, the finances of retirement-income systems and private pensions. The report also has a special focus on flexible retirement options in OECD countries and discusses people’s preferences regarding flexible retirement, the actual use of these programmes and the impact on benefit levels.

The OECD has also published two reports on technology in the pensions sector. Technology and Pensions explores the early regulatory implications of the growing role of technology in pension provision, and looks at what governments are doing more generally to support its development for the benefit of consumers. Robo-Advice for Pensions provides an overview of the types of robo-advisers that are now available and discusses the potential benefits, risks and challenges of such platforms.

PASA announces DC Governance Working Group

On 5 December 2017, PASA, the independent body dedicated to driving up standards in pensions administration, announced the members of its newly formed DC Governance Working Group. The group, set to publish their initial findings in Spring 2018, will develop a set of standards and guidance to support administrators, employers and trustees in all aspects of DC pensions administration.

Kim Gubler, Board Sponsor of the Group and Deputy Chair of PASA stated that the group has agreed six initial areas of focus: “data; employers and trustees; transitions; decumulation; reporting/controls and procedures. The meaningful standards and guidance they produce will be applicable across the entire DC universe, and will act as a reference point for administrators, trustees and employers alike.”

PLSA publishes “Made Simple” guide

The PLSA has published a Made Simple guide on Cashflow Driven Investment (“CDI”). The guide explains what CDI is, who it is appropriate for and the rationale for using it. In addition, it includes the process of monitoring and validating the results so trustees can assess whether their chosen CDI solution would deliver to meet expectations.

MIFID II top five actions for pension schemes published by PLSA

The PLSA has published a guide outlining the top five actions that pension schemes need to take before the MiFID II implementation deadline of 3 January 2018.

MiFID II will introduce wide-ranging changes to financial services regulation that will affect UK pension schemes and how they use and pay for fund management services. The PLSA’s guide is designed to help trustees, scheme managers and other senior decision makers consider what action is needed before and after the implementation of MiFID II.

For further information on MiFID II, please see Sackers recent Key Steps for pension schemes, and the to-do list set out in the latest Finance & Investment Briefing.

PLSA issues guidance on climate change risk to pension funds

The PLSA has published guidance, in association with ClientEarth, which warns of the “severe risks” posed to pension fund investments by climate change.

The PLSA’s guidance provides a framework for pension funds to act on climate change. It recommends that funds should undertake a programme of measures to mitigate risks and take advantage of opportunities relating to climate change, including:

• incorporating climate change expertise into trustee boards and other governance bodies
• reviewing how current and prospective asset managers consider climate change as part of their investment decisions, and incorporating this into manager selection processes
• instructing asset managers to engage with investee companies with regard to their plans to mitigate and adapt to climate change
• reporting on their management of climate change related risk to beneficiaries, using the reporting framework recommended by the Financial Stability Board’s Task Force on Climate Related Financial Disclosures.

Twelfth version of the Purple Book published

The PPF has published the twelfth edition of the Purple Book, which gives a comprehensive picture of the risks faced by DB pension schemes in the UK, reviewing the 5,588 private DB schemes eligible for the PPF. The data is based on information that eligible schemes are obliged to provide to TPR, and covers the period from 1 April 2016 to 31 March 2017.

The twelfth edition reveals that the proportion of open schemes has remained relatively steady in the twelve months to March 2017, with 12% of DB pension schemes currently open to new members, down from 13% in 2016 and from 43% in 2006 (when Purple Book records began). Conversely, the number of schemes closed to future accruals has risen to 39% in 2017, up from 35% in 2016.

WPC issues report into cold calling inquiry

The WPC has issued a report, Protecting pensions against scams: priorities for the Financial Guidance and Claims Bill. The report calls for the Government to “take urgent legislative action through the Financial Guidance and Claims Bill”. Stating that the Government’s current timetable for introducing an improved measure “is not urgent enough”, it calls for an enforceable ban on cold calling to be in place “by June 2018 at the latest”.

The WPC states that it will make further recommendations in at least one further report on pension freedoms.

United Biscuits (Pension Trustees) Limited v HMRC (High Court, 30 November 2017)

The High Court has held that, as a matter of EU law, pension fund management services provided by non-insurers (companies not authorised to conduct insurance business) are not exempt from VAT.

Please see our case report for further details.

Please also see our Alert for further information on HMRC’s recent announcement regarding removal of the VAT exemption on the supply of pension fund management by insurers. The change is intended to take effect from 1 April 2019.