Better workplace pensions: Reducing regulatory burdens and minor regulation changes

Background

The DWP’s consultation on reducing regulatory burdens and minor regulation changes (published on 12 November 2015) looks at reducing regulatory burdens, and making “small but important” changes to various sets of regulations, including those which deal with scheme administration, governance and accounting. It also seeks views and evidence about how better disclosure of information about schemes’ investments can be achieved.

In this response

• General comments
• The Occupational Pension Schemes (Scheme Administration) Regulations 1996
• Investments: Call for evidence

General comments

We support the Government’s initiatives towards better workplace pensions and welcome the opportunity to comment on present consultation.

In general, we consider the proposals to reduce regulatory burdens to be reasonable. However, we have some specific comments which we outline below.

As legal advisers to trustees, employers and providers of workplace pension schemes, our comments relate to those aspects of the consultation which are relevant to our practice. We do not seek to answer every question in the consultation.

The Occupational Pension Schemes (Scheme Administration) Regulations 1996

Regulation 1: Interpretation (Question 3)

The consultation proposes a new definition for “relevant multi-employer schemes”, creating a single condition for determining whether a scheme should be within the scope of the requirements. This definition is intended to encompass both commercial master trusts and industry-wide schemes which are available to unconnected employers with in the same sector.

The proposed definition is a “scheme which is or has been promoted to employers as a scheme where participating employers need not be connected…” [our emphasis], subject to certain exceptions.

In our view, use of the word “promoted” (which is undefined in the draft regulations) is unclear. Whilst commercial master trusts are actively promoted, in the sense of being advertised and marketed within the pensions industry, this is not necessarily the case for all relevant multi-employer schemes. A suitable alternative may therefore be “established” or “set up”.

Regulation 4: Protection of members where there are no participating employers (Questions 4 & 5)

The draft regulations refer to participating employers as “any employer who currently employs members of the scheme or persons who are eligible to join the scheme”.

We note the DWP’s comment in the consultation that “a multi-employer scheme with only deferred members and no participating employers at all would be a rare occurrence”. However, there will be situations when an employer retains responsibility in connection with a member’s pension provision even where they no longer employer the particular individual. It is the obligations to the scheme which are key, rather than the individual member’s employment status. We therefore suggest retaining a link to former employers.

Investments: Call for evidence

The consultation seeks views on improving how information about investments is disclosed. as the DWP notes, the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 (the Disclosure Regulations) already require trustees and managers of occupational schemes to disclose some information on request to members, prospective members, spouses, beneficiaries and trade unions.

Selection and monitoring

A typical Statement of Investment Principles (SIP) will set out information on the procedure for the selection, monitoring, retention, stewardship and realisation of investments, as well as for the selection, appointment and monitoring of investment managers and other agents.

SIPS are often made available to members and others as a matter of course, being published on a scheme’s website. Many of these are generally accessible without the need for a member or prospective member to obtain a password. As such, additional costs associated with disclosure should be limited.