Pensions UK: What's new this week - April 2021

Allen & Overy LLP

This week we cover topics including: the updated industry code of practice on pension scams; the Pensions Regulator’s climate change strategy; and the increase to the fraud compensation levy. For an overview, listen to our summary podcast bringing you up to speed on the key headlines in less than two minutes.

  • Pension scams: updated industry code of practice; TPR webinar
  • TPR publishes climate strategy
  • PPF announces increase to fraud compensation levy
  • TPR updates cross-border guidance

ension scams: updated industry code of practice; TPR webinar

The Pension Scams Industry Group has published a new version of the industry code of practice on pension scams, which is effective from 1 April 2021. It is important for trustees and administrators to review current practices against the updated Code, as the Pensions Ombudsman judges complaints about transfer due diligence against statutory requirements and industry practice at the time of transfer.

The Code has been restructured and existing content updated to reflect developments since the previous version, including the Pensions Regulator’s (TPR) expectations for trustees and administrators, TPR’s scams pledge and changes in scam practices. Updates include:

  • A call to action on contacting members via telephone. The Code now recommends that schemes consider a direct fact-finding call from the trustee/administrator to the member early in the process, as well as a final call before any payment is made where sufficient concerns have been identified. A call is also recommended when a transfer is being refused.
  • New questions in the due diligence process (including new questions for members).
  • A call for action to report all transfers of concern (not only those that are refused) and an increased emphasis on conducting sufficient analysis and documenting evidence to enable schemes to monitor potential scam activity (for example where a request is withdrawn) and to report concerns.
  • A recommendation that schemes conduct their own appropriate due diligence on transfers that are carried out via automated systems such as Origo, until the relevant administrator/scheme has been identified as not posing a risk.

The Code will be updated again to reflect changes to restrict statutory transfer rights (which are due for consultation shortly, with the measures to be implemented in the autumn).

Separately, TPR has published a webinar on pension scams, which includes a discussion of TPR’s pledge to combat pension scams and a panel Q&A.

Read the new version of the Code.

Watch the webinar.

TPR publishes climate strategy

TPR has published its climate change strategy, detailing aims and objectives for TPR with a particular focus on the next three years, as well as setting out a principles-based regulatory approach. Points to note include:

  • TPR will publish guidance on its approach to the upcoming climate-change related duties, which will illustrate how trustees can take national and international climate change goals into account. Read more about the proposed requirements. TPR will also produce guidance on taking account of the impact of climate change in integrated risk management – this will apply to all DB schemes, including those outside the scope of the new climate change reporting requirements.
  • TPR will update the content on climate change in the Trustee Toolkit.
  • TPR may take enforcement action if schemes do not publish their statement of investment principles (SIPs) and implementation statement and (for in-scope schemes) meet new climate-change related duties. TPR will ask for the web address(es) where these documents are published as part of the scheme return. This will be used to identify non-compliance with disclosure obligations and to generate a public index of scheme SIP web addresses.
  • TPR plans to review a selection of implementation statements and publish its findings.
  • TPR plans to publish a Climate Adaptation Report in autumn 2021, outlining its findings on how pension schemes are responding to and managing the risks and opportunities from climate change.

The strategy also mentions other sustainability-related financial risks and targets but focuses specifically on climate change, with the possibility of a broader regulatory focus in future.

Read the strategy.

PPF announces increase to fraud compensation levy

The Pension Protection Fund (PPF) has announced an increase to the fraud compensation levy for 2021/22. The levy has been increased from 25p per member to 75p per member (except for master trusts, where the rate will be 30p per member). 75p per member is the maximum rate that can currently be set by the PPF – for any further increase, the government would need to amend the regulations governing the levy.

An increase to the fraud levy had been expected following a High Court decision that claims arising from scams may be eligible for compensation from the Fraud Compensation Fund – the PPF has already received claims valued at over £40m, and expects to receive further claims.

This development follows the recent announcement of increases to the general scheme levy.

Read the press release.

Read about the increase to the general levy.

Read about the High Court decision.

TPR updates cross-border guidance

TPR has updated its guidance on cross-border issues following the end of the Brexit transition period in relation to auto-enrolment issues, and on penalties that may apply to employers contributing to occupational schemes in the EU/EEA.

On auto-enrolment, TPR has revised its earlier guidance to reflect changes to legislation as the result of Brexit. As a result of those changes, from 1 January 2021 employers may be able to continue using an EU/EEA scheme as a qualifying scheme for auto-enrolment, provided the relevant requirements are met. Employers would still need to provide an eligible automatic enrolment scheme for new joiners.

The guidance on potential penalties for employers has been updated to note that penalties may apply to an employer where contributions are made to an EU/EEA scheme by UK employers, or by a non-UK employer in respect of UK employees, unless certain conditions are met.

Read the guidance.

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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