Pensions: Joint DB/DC Trustee agenda update - current legal issues for June 2022 meetings

Allen & Overy LLP

Allen & Overy LLP

Welcome to our monthly update on current legal issues, designed to help you stay up to date with key developments between trustee meetings, and to support the legal update item on your next trustee agenda. We also have a DC-only briefing.

TPR annual funding statement NEW

The Pensions Regulator (TPR) has published its latest annual funding statement, with a focus on current market uncertainties. All DB schemes and sponsors should familiarise themselves with the content, and especially those with an effective valuation date between 22 September 2021 and 21 September 2022 (Tranche 17), or where funding and risk strategies are being reviewed in connection with wider scheme changes. Read the statement.

ACTION: Review the statement and consider whether any changes are required to your scheme’s funding strategy or processes.

PASA DB transfers guidance NEW

The Pensions Administration Standards Association (PASA) has published good practice guidance on DB transfers. The recommendations in the guidance are voluntary, but PASA anticipates that the Pensions Ombudsman will reference this when reviewing complaints, as an example of what good industry practice looks like. Read the guidance.

ACTION: Discuss with your administrators whether their processes are in line with the new guidance.

GMP equalisation guidance

HMRC has published a new GMP equalisation (GMPE) newsletter, with guidance on tax issues around making top-up payments to correct previous transfers which did not account for GMPE (as a top-up transfer or lump sum); and GMP conversion. Read the newsletter.

PASA has published FAQs designed to provide pragmatic guidance to administrators implementing GMPE. The Pensions and Lifetime Savings Association (PLSA) has released HMRC-approved guidance on tax treatment of interest on GMPE payments. Read the FAQs and guidance on interest payments.

ACTION: Consider the guidance as part of any ongoing GMPE project.

‘Stronger nudge’ requirements REMINDER

From 1 June 2022 trustees will be required to give members a ‘stronger nudge’ to obtain pensions guidance. Among other things, this means that schemes will be required to offer to book a Pension Wise appointment for members over 50 who want to access flexible benefits. Read the regulations and TPR’s guidance.

ACTION: Check with your administrators that processes are in place to ensure compliance from 1 June.

TPR climate change example

TPR has published an illustrative example of how trustees might work through the requirements of the climate change governance and reporting regulations. This is not a one-size-fits-all checklist, but will give schemes a good idea of TPR’s expectations. Read the example and watch our recent webinar.

ACTION: Check your processes against the example to identify any areas which may need further attention.

TPR guidance on Russia’s military invasion of Ukraine

TPR has issued guidance for trustees regarding Russia’s military invasion of Ukraine, setting out its expectations in light of volatility in investment markets and an expected period of heightened uncertainty. It includes a number of action points for trustees to consider. Read the guidance.

ACTION: Review TPR’s guidance and consider whether there are any action points for your scheme; keep a watching brief on developments.

Have your say

  • TPR has launched a consultation on a new enforcement policy, consolidating and simplifying existing policies for DB, DC, hybrid and public service pension schemes, as well as a prosecution policy updated to reflect TPR’s new powers under the Pension Schemes Act 2021. The consultation closes on 24 June 2022: read more.

Watch this space

    • The government has consulted on changes to the notifiable events regime. The regulations that were expected to come into force on 6 April 2022 have been delayed; there has been no official update on a revised date, but the current industry expectation is that this may be October 2022: read more.
    • TPR has consulted on its proposed single code of practice: watch our webinar on the proposals; read TPR’s interim response. The interim response noted that TPR does not expect to lay the new code in parliament before spring 2022. It is, therefore, unlikely to become effective before summer 2022.
    • Consultation on new DB funding regulations is expected in the first half of 2022. TPR has announced that its second consultation on the revised DB funding code has been pushed back to late summer 2022: read more.
    • A call for evidence on decumulation in occupational schemes is expected shortly, covering areas including whether there is a need to require investment pathways (offering a range of investment plans based on what a member intends to do with their pension pot).
    • A revised code on transfers, and other materials from the Pension Scams Industry Group, are expected in June.
    • Regulations to replace the current regime on strategic objectives for investment consultancy providers and competitive tenders for fiduciary management services are expected in the first half of 2022.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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