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

• Autumn Budget 2021
• DB master trust self-certification regime launched
• FCA and FOS complaints data
• Financial regulators publish fourth edition of plan for upcoming work
• HMRC publishes Pension Schemes Newsletter 134
• Dashboards progress report
• Review of the PPF’s Fraud Compensation Levy ceiling
• PPI Briefing note published
• Private Members’ Bills
• Climate change

Autumn Budget 2021

On 27 October 2021, the Chancellor, Rishi Sunak, delivered the Autumn Budget and Spending Review 2021. The key pensions-related announcements were:

• further DC charge cap changes on the cards – following recommendations from the Taskforce on Innovation, Growth and Regulatory Reform (see 7 Days) and the Productive Finance Working Group (see 7 Days), the Government will consult “before the end of the year” on further changes to the charge cap for DC AE schemes. The consultation will specifically consider amendments to the scope of the cap to “better accommodate well-designed performance fees and enable investments into the UK’s most productive assets”, enabling savers to “benefit from better growth in their long-term investments” while continuing to protect them. The Government will also continue “wider policy work” to understand and remove various barriers to illiquid investment
• top-ups for low earners in Net Pay arrangements – in 2025-26, the Government will introduce a system to make top-up payments (in respect of contributions made from 2024-25 onwards) directly to low-earning individuals who save into a pension scheme using a Net Pay arrangement. Currently, savers whose earnings fall below the personal tax threshold, and are members of Net Pay arrangements, do not receive the 20% tax relief which is automatically applied to savers in Relief at Source This includes many savers in master trusts which use Net Pay arrangements. The aim is to help “better align outcomes” with savers using Relief at Source. The response follows a 2020 call for evidence (see 7 Days), which had proposed a number of potential solutions, including mandating the use of Relief at Source, or introducing a standalone charge for such schemes. An estimated 1.2 million individuals could benefit by an average of £53 a year following implementation of the proposed change
• the Government will invest in modernising the administration of tax relief, which will require “significant” IT system changes. It is “open to discussing the implications” of the different basic rate of tax in Scotland (19%, compared to 20% in England, Wales and NI) with the Scottish government. Draft legislation will be published in 2022, and legislated for in a later Finance Bill
• taxation of public service pension reform remedy – legislation will be introduced to ensure the pensions tax framework applies as intended to the public service pension reforms remedy (following the McCloud judgment). The remedy, which addresses age discrimination by making changes to the pension provision of the public servants affected, is set out in the Public Service Pensions and Judicial Offices Bill which will have retrospective effect from 1 April 2015. The tax legislation will also apply retrospectively to this date. A power in the Finance Bill 2021-22 will make detailed technical changes in secondary legislation, taking effect from 6 April 2022
• state pension uprating – the Government confirmed the temporary suspension of the earnings element of the Triple Lock used to uprate the State Pension, Pension Credit and survivors’ benefits in industrial death benefit (see 7 Days).

The draft Finance Bill 2021-22 is due to be published on 4 November 2021, and will contain relevant measures from the Budget. In addition, it will lay the groundwork for:

• the increase in NMPA (see our response to consultation) – NMPA is the earliest age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge. With effect from 6 April 2028, NMPA will rise from age 55 to 57
• Scheme Pays Reporting – as consulted on earlier this year (see 7 Days), the Government will introduce legislation to extend Scheme Pays reporting and payment deadlines. This will allow an individual to ask their pension scheme to settle their AA charge of £2,000 or more from a previous tax year by reducing their future pension benefits. The changes will have effect from 6 April 2022
• expanded dormant assets scheme – following consultation (see 7 Days), in 2021 the Government announced its intention to expand the scheme to allow certain dormant assets from the pensions sector to be used for public benefit, whilst protecting the original asset owners’ legal right to reclaim the amount that would be due to them had a transfer into the scheme not occurred.

DB master trust self-certification regime launched

On 27 October 2021, the PLSA launched a DB master trust self-certification regime.

Designed by a DWP-led industry working group to raise awareness and, where appropriate, encourage take-up of DB master trusts, “DB Master Trust Self-Certificates” are a standard template allowing DB master trusts to provide information on their structure, governance and how they operate. They are intended to help scheme trustees and employers who may be considering DB master trusts as a consolidation option to understand the key features and to facilitate informed discussions.

The self-certification concept stems from the DWP’s 2018 DB White Paper, which highlighted the need to draw attention to the wider benefits of consolidation, including DB master trusts.

While the self-certificates “provide useful information” about a master trust, “they are not an assessment of the quality of the scheme” and should only be used as a starting point for trustees (they do not include all the information required for scheme trustees to complete their full due diligence).

DB Master Trusts seeking self-certification can find the guidance for completing the process on the PLSA’s website, and can contact the PLSA, which is hosting the initiative, to request the self-certification template. An application for self-certification should include proof of registration with HMRC and TPR.

FCA and FOS complaints data

The FCA’s latest complaints data, published on 28 October 2021, shows a “significant increase” in pensions-related complaints (26% over six months), with complaints about workplace personal pensions up by 96%.

FOS’ annual report, published on the same day, notes that it continues to see a large number of complaints against SIPP operators, where consumers had transferred their pensions to SIPPs “to make unusual unregulated investments”. It notes that the majority of these complaints were upheld.

Financial regulators publish fourth edition of plan for upcoming work

On 1 November 2021, the Financial Services Regulatory Initiatives Forum issued the fourth edition of its Regulatory Initiatives Grid.

Amongst the initiatives included in the Grid the entries of pensions interest include recent climate related additions, and the expected timing of TPR’s DB scheme funding consultation (Q1 2022) and CDC code of practice (Q4 2021 or Q1 2022). It also notes that TPR has established a working group which will produce an action plan on how to increase diversity and inclusion in pension trustee boards either later this year or in Q1 2022.

HMRC publishes Pension Schemes Newsletter 134

On 29 October 2021, HMRC published Pension Schemes Newsletter 134. It contains articles on:

• measures announced at the Autumn Budget 2021
• extending some temporary changes to pension processes as a result of COVID-19
• relief at source declarations
• pension scheme migration (from the “Pension schemes online” service to the “Managing pension schemes” service) – an update on timing and processes
• accessing business tax accounts
• pension flexibility and registration statistics.

Dashboards progress report

PDP’s latest progress update report was published on 26 October. The report notes that “the programme is moving forward at pace” and is now in “the develop and test phase, where the digital architecture takes shape.” It warns schemes that it is “moving fast towards the stage where pensions dashboards become a reality. And as we take these steps, we need the rest of the pensions industry to keep pace with us.”

The DWP is expected to consult on regulations this winter, which are likely to come into force later in 2022. As “this doesn’t leave much time before the start of compulsory onboarding for some organisations in 2023” , the PDP strongly emphasises “the need to take action now”. Key questions for data providers to consider include the state of available data, and whether there is a team and plan in place to prepare for connection.

Information to support organisations is available through the data providers hub and corresponding dashboard providers hub. Further information on technical requirements will be published “towards the end of the year”.

Review of the PPF’s Fraud Compensation Levy ceiling

On 1 November 2021, the DWP published a consultation seeking views on a proposed change to the Fraud Compensation Levy ceiling for the levy year 2022/2023 onwards.

This follows the High Court judgment in The Board of the PPF v Dalriada Trustees Ltd (see 7 Days), as there are now insufficient assets within the FCF to meet claims arising from that judgment in the short term. The ceiling under the proposed change would provide for levy rates not exceeding £0.65 per member for master trusts and £1.80 per member for other eligible occupational schemes (increasing from the current £0.30 and £0.75 respectively).

The consultation closes on 10 December 2021.

PPI Briefing note published

The PPI has published Briefing Note 128 – The Future Life: How can younger people be supported to achieve adequate retirement outcomes? The note explores the way in which people currently aged between 18 and 35 are preparing for later life and retirement, the way their expectations for retirement differ from previous generations of savers, and the specific challenges they face in preparing for adequate retirement outcomes. It was informed by data and insights collected through the PPI’s Young People and Pensions Survey 2021.

Private Members’ Bills

Two pensions-related Private Members’ Bills have been recently published ahead of their Second Readings:

• the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill was published on 26 October 2021. The Bill aims to clarify aspects of existing GMP conversion legislation
• the Public Sector Exit Payments (Limitation) Bill was published on 27 October 2021. The Bill is designed to “limit exit payments made by some public sector organisations to employees; and for connected purposes”.

In practice, Private Members’ Bills rarely make it onto the statute books.

Climate change

Regulators publish climate change adaptation reports

On 28 October 2021, TPR published its “climate change adaptation report”, alongside a press release. The report is TPR’s contribution to the National Adaptation Programme’s drive to assess the UK’s resilience to climate change.

TPR warns that “pension schemes in the UK still have much work to do if they are to adapt to the challenges of climate change” and that “too few schemes give enough consideration to climate-related risks and opportunities, which means investment performance and saver outcomes could suffer.” However, it “recognises that practices are evolving, and trustees – and savers – are more engaged with the need to consider climate factors. We remain convinced that a landscape of resilient pensions schemes that protect savings from climate risk is entirely within reach.”

TPR will publish guidance clarifying what it will look for from schemes as they assess, manage and prepare to report on climate-related risk and opportunities. It will work with its regulated community to ensure the guidance is clear and easily adopted. To support trustees in meeting their duties, the proposed new single code of practice will incorporate several climate change modules. The draft proposals include a requirement that trustees assess climate-related risks and opportunities as part of their system of internal controls. TPR will work with the DWP to share best practice in climate risk reporting.

TPR published its climate change strategy in April 2021 (see 7 Days). In July, TPR launched an eight-week consultation on its draft climate-related governance and reporting guidance (see 7 Days). The final guidance will be published in November.

The FCA’s and PRA’s climate change adaptation reports were also released on 28 October. A joint statement by the FCA, PRA, TPR and FRC sets out “how climate change affects our respective responsibilities and the actions we, and the financial sector, are taking in response to it.” The FCA’s report includes a timeline setting out the FCA’s major publications between now and next summer relating to climate change. These include its final rules on disclosures aligned with TCFD recommendations for FCA-regulated pension funds, and work relating to sustainability disclosure requirements and product labelling.

UK to enshrine mandatory climate disclosures for largest companies in law

On 29 October 2021, the Government published plans to require firms to disclose climate-related financial information in line with TCFD recommendations, ensuring they consider the risks and opportunities they face as a result of climate change. The measures, due to come into force from 6 April 2022, follow the publication of the UK’s Net-Zero Strategy and complements measures already brought forward for pensions (see our Alert).