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

• Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill
• Bank of England and FCA encourage market participants to switch to SONIA instead of LIBOR
• Data protection update: LIBE calls for amendment to draft UK adequacy decisions, and ICO update on standard contractual clauses
• DWP consultation on a mandatory approach to simpler annual benefit statement templates
• DWP consultation on pension scams
• FSCS article on the rise in online financial scams
• HMRC publishes Trust Registration Service Manual
• PDP publishes progress update report
• PLSA calls for legislation to provide extra support for savers at retirement
• PLSA report on cost transparency initiative usage
• Queen’s Speech 2021

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

On 12 May 2021, the Government published the Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill. Amongst other things, the Bill gives the Secretary of State the power to make a loan to the PPF to enable the payment of compensation to eligible occupational pension schemes from the Fraud Compensation Fund (“FCF”), following the High Court case of the PPF v Dalriada Trustees (see 7 Days).

Bank of England and FCA encourage market participants to switch to SONIA instead of LIBOR

With the transition away from LIBOR underway (see 7 Days and our latest FIG briefing), the Bank of England and FCA have announced that they support a transition to rates based on the Sterling Overnight Index Average (“SONIA”) and “encourage market users and liquidity providers in the sterling exchange traded derivatives market to switch the default traded instrument to SONIA instead of LIBOR from 17 June this year”.

Data protection update: LIBE calls for amendment to draft UK adequacy decisions, and ICO update on standard contractual clauses

On 11 May 2021, the European Parliament’s Civil Liberties Committee (“LIBE”) announced that it has passed a resolution calling on the European Commission to amend the draft adequacy decisions for the UK to bring them in line with EU court rulings and concerns raised by the European Data Protection Board (“EDPB”) (see 7 Days). The resolution states that if the implementing adequacy decisions are adopted without changes, national data protection authorities in the EU should suspend transfers of personal data to the UK when “indiscriminate access” to personal data is possible.

The hope is that the European Commission will finalise the adequacy decisions before the “bridging” mechanism comes to an end (currently set to be the end of June 2021 – see 7 Days). The ICO had recommended that organisations have alternative data transfer measures in place by the end of June 2021 in the event agreement was not reached.

On 6 May 2021, the ICO announced that it is working on bespoke UK standard contractual clauses for international data transfers and intends to consult on these clauses in the summer. The ICO noted that it is also considering recognising transfer tools from other countries, including the EU’s standard contractual clauses (see 7 Days).

DWP consultation on a mandatory approach to simpler annual benefit statement templates

On 17 May 2021, the DWP published a consultation on proposed regulations and accompanying statutory guidance (which includes an illustrative template) introducing new standard requirements for the length and format of annual workplace pension benefit statements for members of certain DC workplace pension schemes used for AE.

This follows the DWP’s 2020 response to its consultation on simpler annual benefit statements for workplace pensions (see 7 Days).

The consultation closes on 29 June 2021. See our forthcoming Alert for further detail.

DWP consultation on pension scams

On 14 May 2021, the DWP published a consultation on draft regulations, made under the Pension Schemes Act 2021, which will require the trustees and managers of occupational and personal pension schemes to ensure that at least one of four new conditions is met before they can act on a pension transfer request from a scheme member.

Trustees / scheme managers will also be given the power to request information from the member in relation to the transfer to help them identify whether they are at risk of a scam.

The consultation closes on 10 June 2021, with the regulations set to come into force in autumn 2021. Accompanying guidance for schemes will be published by TPR and the FCA in due course. See our Alert for further detail.

FSCS article on the rise in online financial scams

On 12 May 2021, the FSCS published an article on the rise in online financial frauds, which covers pensions and investment scams. It sets out how such scams work, what the FSCS is doing to stop them, and notes that user-generated fraud is now included in the draft Online Safety Bill (see below).

HMRC publishes Trust Registration Service Manual

New rules were introduced in October 2020 (see 7 Days), as part of the UK’s implementation of the Fifth Money Laundering Directive (“MLD5”), which extend the scope of the trust register to all UK and some non-UK trusts that are currently open (whether or not the trust has to pay any tax, but with some specific exclusions). On 4 May 2021, HMRC updated its guidance on trust registration (see 7 Days). HMRC has today (17 May 2021) published its Trust Registration Service Manual which outlines the types of trust that need to be registered, and provides detail on registration, deadlines, trustee data retention obligations and third party access requests.

PDP publishes progress update report

On 13 May 2021, the PDP published its third progress update report which includes information about progress made since the last update report and outlines priorities for the next six months, including more detail on programme timings.

The report confirms that a call for input will be issued at the end of May, detailing proposals for the staged compulsory connection of pension providers to the dashboard. A specification document for suppliers will also be published, providing more information in preparation for those connecting to the dashboard.

The PDP published a blog to accompany the release of this update, which gives more information about the contents of the report, including details about the programme timeline and the technical architecture procurement.

PLSA calls for legislation to provide extra support for savers at retirement

On 17 May 2021, the PLSA reported that it has made a “substantial” submission to the WPC’s inquiry into the Pension Freedoms (see 7 Days), calling for “a new statutory obligation on pension schemes, designed according to appropriate governance standards, requiring them to provide helpful guidance and sign-posting to suitable products”.

PLSA report on cost transparency initiative usage

On 12 May 2021, the PLSA reported on the use of the cost transparency initiative (“CTI”) framework (an industry standard for institutional investment cost data – see 7 Days). The PLSA reported that 79% of the pension schemes surveyed have now used the CTI framework compared to just over half in May 2020. Further, while 11% of schemes are not making use of the CTI framework currently, they plan to do so in 2021.

Where the research highlighted areas for improvement, the CTI is working to address these with technical updates. It will publish additional case studies later this year to help schemes understand how to make best use of CTI data, and to challenge their managers where appropriate. The CTI will also consider whether further guidance can be provided in relation to benchmarking costs information and how this might relate to value for money more widely.

Queen’s Speech 2021

On 11 May 2021, the Queen delivered the Queen’s Speech, marking the formal opening of Parliament and setting out the Government’s legislative agenda for the coming session. From a pensions perspective, the following points are of interest:

• the Dormant Assets Bill will expand the existing Dormant Assets Scheme in relation to insurance and pensions, among other things, as confirmed in HMT’s consultation response in January 2021 (see 7 Days)
• the Public Service Pensions and Judicial Offices Bill is designed to ensure equal treatment of public service pension schemes members in order to remedy the discrimination identified in the McCloud judgement. The Bill also seeks to reform the pension arrangements and increase the mandatory retirement age for judicial office holders from 70 to 75 (see 7 Days). Related to this, a written ministerial statement made on 13 May 2021 confirmed several key elements of changes to the LGPS to remove age discrimination in line with the McCloud judgement and confirmed that a full Government response to the 2020 consultation on amendments to the statutory underpin (see 7 Days) will be published later this year. Regulations giving effect to these changes will be made after the new primary legislation above has completed its passage through Parliament, and the Government’s intention is that they will come into force on 1 April 2023.
• the Online Safety Bill to improve internet safety. Although no reference to online pension scams was made in the Government’s background briefing, in a Parliamentary statement on 12 May 2021, Oliver Dowden, Secretary of State for Digital, Culture, Media and Sport, confirmed that the Government will include user-generated online fraud in the forthcoming Bill.