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

• CMA publishes remedies implementation timetable in investment consultants market investigation
• FCA publishes consultation in relation to its Retirement Outcomes Review (ROR)
• Government grants NEST contingency funding
• HMRC publishes GMP “conversion and equalisation” guidance note
• PLSA launches new PQM standards
• Report into DB transfers, and joint protocol issued
• TPR issues statement on Brexit
• TPR issues updated scheme data guide
• WPC seeks industry views on auto-enrolment evidence

CMA publishes remedies implementation timetable in investment consultants market investigation

On 25 January 2019, the Competition and Markets Authority published its timetable for implementation of the remedies set out in the final report on the investment consultancy market.

The statutory deadline for implementing remedial action is 11 June 2019. The remedies will be implemented by way of CMA order, which the CMA intends to publish for consultation during February 2019, and notifying the European Commission, in April 2019, of any requirements that are intended to be imposed. TPR is expected to issue guidance within six months of the order being made.

FCA publishes consultation in relation to its Retirement Outcomes Review (ROR)

On 28 January 2019, the FCA published a consultation paper CP19/5 on “Retirement Outcomes Review: Investment pathways and other proposed changes to our rules and guidance”.  This follows the FCA’s summer 2018 ROR Final Report and Consultation Paper, which set out its proposed remedies in response to the review’s findings.

This consultation outlines the FCA’s second proposed package of remedies stemming from the ROR. In particular, it seeks feedback on proposals to:

• require drawdown providers to offer non-advised consumers a range of investment solutions to help consumers choose investments that broadly meet their objectives (“investment pathways”)
• require drawdown providers to ensure that consumers invest in cash only if they make an active decision to do so, and give consumers warnings about the likely impact of investing in cash on their long-term income
• require firms to tell customers beginning to draw on their pension how much they paid in charges over the previous year, in pounds and pence, including transaction costs.

The FCA also confirms that other proposed changes, including those for “wake up” packs, will go ahead. The changes to these packs, retirement risk warnings, reminder requirements and the annuity prompt are due to come into force on 1 November 2019.

Changes which will cover making the cost of drawdown products clearer, and comparison easier, are expected to come into force on 6 April 2020, subject to consultation.

The FCA is inviting feedback from stakeholders on measures in CP19/5 by 5 April 2019, before finalising the rules.

Government grants NEST contingency funding

In a Written Ministerial Statement published on 22 January 2019, Guy Opperman (Parliamentary Under Secretary of State for Pensions & Financial Inclusion), announced that the Government is to grant NEST a contingent liability guarantee.

The guarantee is required so that NEST will meet the requirements of the TPR master trust authorisation process. Due to the nature of its financial arrangements with the Government, NEST is unable to build up the financial reserves needed to meet an aspect of the master trust “financial sustainability” criteria.

If a triggering event was to occur, then the maximum size of the contingent liability required to be made available to NEST would be £329 million, an amount estimated by NEST and accepted by TPR during a pre-authorisation readiness review. The amount of the contingent liability will be reviewed annually for the period it is required, which is currently expected to be until 2034.

HMRC publishes GMP “conversion and equalisation” guidance note

On 23 January 2019, HMRC published a brief guidance note relating to GMP conversion and equalisation.

The guidance confirms that “conversion can be used as part of a process by which schemes can remove any inequality between men and women resulting from the GMP rules. A proposed methodology can be used – but is not the only method available”. Schemes considering equalisation are advised to take legal advice.

PLSA launches new PQM standards

On 24 January 2019, the PLSA announced the launch of new standards for its Pension Quality Mark (“PQM”) accreditation to “help raise the quality” of single-employer DC pension schemes.

The new standards aim to recognise the changes to DC pensions over recent years and focus on a number of key areas, including increased contribution rates and governance standards.

The PLSA also announced that it is to establish a new PQM Standards Committee to “drive forward” the work.

Further, once the new TPR master trust authorisation regime comes into force, the PLSA will no longer issue licences for its PQM Ready accreditation, which had been awarded as an accreditation for master trusts.

Report into DB transfers, and joint protocol issued

On 22 January 2019, TPR, the FCA and the SFGB issued a press release welcoming an independent review undertaken by Caroline Rookes into communications and support provided to British Steel Pension Scheme members during the 2017-18 pension restructuring exercise.

The report was commissioned by TPR following a recommendation from the Work and Pensions Select Committee. It proposes a number of recommendations for the regulatory and consumer bodies aimed at helping savers make the right decision about whether to transfer their pension pots from DB schemes. The bodies have stated that they will now consider how to act on the recommendations, including, where appropriate, having discussions with trustees and the DWP.

On the same day, TPR, the FCA and SFGB (then TPAS) published a joint protocol, which looks to ensure the bodies work in a co-ordinated way to support members of pension schemes. This work includes providing letters for trustees to send to members alerting them to the risks of transferring out of DB pension schemes and giving practical information. The press release confirms that the letter has already been sent to 31 pension schemes.

The joint protocol addresses some of the concerns raised in the report, including the need for “early intervention and sharing intelligence between the public bodies”, and for clear communication materials for trustees in future scheme restructurings. As the protocol was drafted before the report was released, it was not able to take account of it fully, but the bodies note that they will consider those recommendations that are not immediately addressed.

TPR issues statement on Brexit

On 24 January 2019, TPR issued a statement on the UK’s exit from the EU, aimed primarily at the trustees of DB schemes. TPR notes that Brexit should not “have a significant effect in respect of the legislative basis under which schemes operate or trustees’ ability to continue to administer their scheme effectively”. However, it highlights some specific areas to which trustees should pay attention.

It notes that, “where relevant, trustees should undertake a review of any actions or contingency plans in the context of ‘no deal’, if they have not already done so”. It asks trustees to familiarise themselves with the DWP’s guidance on the payment of occupational pension benefits to EU citizens in the UK and UK nationals in the EU in a ‘no deal’ scenario, and to consider cross-border issues where relevant.

The statement also notes that TPR’s 2019 Annual Funding Statement is due to be published in early March, and that it will provide an update on TPR’s expectations around managing risks from the perspective of DB pension plans.

TPR issues updated scheme data guide

TPR has published an updated version of its “Quick guide to measuring your data”. This was first issued following the changes to scheme return information requirements for the 2017/18 scheme return year onwards.

The guide outlines what data is required, how it should be measured, and how “common” and scheme-specific (“conditional”) data scores should be calculated.

WPC seeks industry views on auto-enrolment evidence

The Work and Pensions Committee held a one-off evidence session on 23 January 2019, to seek industry views on the “maturing” auto-enrolment market. The WPC has had a “watching brief” on implementation of auto-enrolment since 2015. Its May 2016 report concluded that automatic enrolment had been “a great success story”. However, major concerns remained about the infrastructure of pensions regulation, and in particular how the new levels of retirement savings would be invested.

The key issues that the evidence session explored included improving retirement saving amongst the self-employed and small employers, further reforms to auto-enrolment proposed in the DWP’s 2017 Maintaining the Momentum review, transparency and engagement issues.