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

• HMRC publishes new paper on the Job Support Scheme
• Financial Services Bill 2019-21
• Solvency II Review: Call for Evidence
• LGPS updates exit payments information
• TPR publishes new guidance for trustees and employers considering a DB superfund
• Companies House updates Coronavirus guidance

HMRC publishes new paper on the Job Support Scheme

On 22 October 2020, HMRC published a paper which explains the current details of the Job Support Scheme.

The Job Support Scheme is intended to help individuals and businesses to deal with the challenges posed by COVID-19, by assisting employers with retaining their employees. It was announced by the Chancellor of the Exchequer on 24 September 2020, and subsequently revised on 9 and 22 October 2020.

Financial Services Bill 2019-21

On 21 October 2020, the Financial Services Bill was introduced to Parliament.

Measures in the Bill are intended to:

• enhance the UK’s “world-leading” prudential standards and promote financial stability by enabling the implementation of the remaining Basel III standards and a new prudential regime for investment firms. The Bill will also give the FCA the powers it needs to oversee an orderly transition away from the LIBOR benchmark
• promote openness between the UK and international markets by simplifying the process to market overseas investment funds in the UK, and delivering a Ministerial commitment to provide long-term access between the UK and Gibraltar for financial services firms
• maintain an effective financial services regulatory framework and sound capital markets with a number of smaller measures, including improving the functioning of the Packaged Retail and Insurance-based Investment Products Regulation and increasing penalties for market abuse.

The timing of the Bill’s progression through Parliament is subject to parliamentary scheduling.

Also on 22 October, HMT published an accompanying statement, “Amendments to the Benchmarks Regulation to support LIBOR transition”. This statement emphasises the importance of continued active transition away from LIBOR, ahead of its expected cessation after the end of 2021.

Solvency II Review: Call for Evidence

On 19 October 2020, HMT issued a call for evidence seeking views on how to tailor the prudential regulatory regime to support the unique features of the insurance sector and regulatory approach in the UK. This regime is currently governed by Solvency II, an EU Directive which has been brought into UK law and will continue to apply on and from 1 January 2021. Solvency II provides for a market consistent calculation of insurance liabilities and a risk-based calculation of capital. It also sets out the supervisory review process and reporting and transparency requirements for insurance firms.

The call for evidence will be open for responses until 19 January 2021.

LGPS updates exit payments information

On 21 October 2020, the LGPS updated its website to include a statement regarding the period of legal uncertainty faced by LGPS administering authorities from 4th November (when the cap on exit payments comes into force) until LGPS regulations are amended.

In brief, the LGPS Advisory Board has requested the views of Counsel on the risks of challenge to administering authorities and the obligations of scheme employers during this period of legal uncertainty. Once the full advice has been received, and subject to the necessary HMT guidance and Directions being made available, the Board intends to publish the advice along with some commentary.

TPR publishes new guidance for trustees and employers considering a DB superfund

On 21 October 2020, TPR published guidance for trustees and employers contemplating a transfer to a DB consolidator or “superfund” (or other new model). The guidance sets out TPR’s approach to regulating such transfers, and its expectations of trustees and employers when considering whether to transact.

This follows the June launch of TPR’s interim regime for the regulation of superfunds (see our Alert), pending the DWP’s establishment of a full legislative framework for their authorisation and supervision.

Key points include:

• TPR notes that “[w]ell-run superfunds have the potential to offer good outcomes for pension savers and employers, but they will not be the solution for all schemes”.
• Before trustees and their sponsoring employers enter into a transaction with a superfund, TPR expects schemes to demonstrate why they believe it is in the best interest of members, and how the transaction meets three “gateway principles”.
• TPR expects transferring (“ceding”) employers to apply for clearance and for trustees to demonstrate they have undertaken appropriate due diligence in respect of the transfer. Where a clearance application is not appropriate (for example, as the scheme is in PPF assessment) TPR still expects to be notified of the transaction, and to engage with the ceding scheme and superfund.
• The guidance provides specific information on transferring to superfunds where there is no immediate severance of employer covenant, for schemes in PPF assessment, and on partial transfers.
• Schemes should ensure that they take appropriate advice and engage with TPR “at an early stage”. In particular, TPR would generally expect professional covenant advisers to be used and suggests trustees consider the appointment of an independent trustee “in view of the complexity of the considerations”.

For further details, please see our Alert.

On the same day, Nicola Parish, Executive Director of Frontline Regulation at TPR, published a blog: “Superfunds: How we are working to protect savers”.

Companies House updates Coronavirus guidance

On 22 October 2020, Companies House updated its Coronavirus guidance. It explains that its Belfast, Cardiff, Edinburgh and London offices will remain closed to the public until March 2021.