Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.
This week we cover topics including: an update on upcoming climate-change related duties; a government consultation on the ‘stronger nudge’ to pensions guidance; and new GMP conversion guidance.
- Upcoming climate-change related duties: key regulations finalised
- Government consults on ‘nudge’ to guidance regulations
- New GMP conversion guidance
- Latest TPR stakeholder research
Upcoming climate-change related duties: key regulations finalised
The key regulations imposing new climate-change related duties on trustees have now been made into law, following approval of the draft regulations by Parliament. There were no changes from the draft version published in June.
The rules will come into force from 1 October 2021 for schemes with £5bn or more in assets (excluding relevant contracts of insurance) as at the first scheme year-end date on or after 1 March 2020, and authorised master trusts and authorised collective DC schemes. Schemes with £1bn or more in assets will be covered in the second phase of the rollout. Read more about the new requirements.
We are also expecting shortly:
- A further set of regulations that make related changes, including imposing new trustee knowledge and understanding requirements in respect of climate change, and updating existing disclosure requirements so that trustees are required to provide information about where the TCFD report can be found. These changes will apply to trustees that are in-scope for the new rules mentioned above. The regulations have been published in draft: read the draft version.
Read the regulations.
Government consults on ‘nudge’ to guidance regulations
The government is consulting on draft regulations to implement its ‘stronger nudge’ to pensions guidance by trustees of occupational pension schemes, and is seeking views on any impacts or unintended consequences.
The government intends for the ‘stronger nudge’ to apply where a person aged 50 or above who has a right to flexible benefits contacts a scheme to request access to their benefits, or to transfer their benefits with the intention of accessing the pension flexibilities (it would not apply where the transfer is for the sole purpose of consolidation). The government proposes to include exemptions for those who have already received either Pension Wise guidance or regulated financial advice in connection with the application in the previous 12 months, and for those applying for a serious ill-health lump sum. The government has asked for feedback on whether there should be an exemption for small pots (but is not currently proposing to provide this). It also proposes to remove some existing requirements to signpost members to Pension Wise guidance, where the nudge applies.
Under the proposals, trustees would be required to offer to book a Pensions Wise appointment for the individual (and to make the booking where the offer is accepted). If the individual wishes to book the appointment themselves, trustees must provide details of how to make the booking. Trustees would need to receive confirmation of attendance at a Pension Wise appointment, or an opt out, before proceeding with applications, and would be required to keep records.
The consultation states that the government has deliberately not defined what constitutes an application, as it wishes to allow schemes to decide when this process is triggered, however, it would like this process to occur as early as is practical. The consultation also notes that a member might be referred to guidance twice for the same transfer, because of the proposed scam-related changes to statutory transfer rights. The government has said that it ‘believe[s] it is better to give trustees and managers freedom to consider how they can appropriately explain the two guidance appointments to the member, rather than proposing to use regulations to achieve this’.
The consultation closes on 3 September 2021. The provisional start date for the new rules is 6 April 2022.
Read the consultation.
Read about the proposed changes to statutory transfer rights in relation to scams.
New GMP conversion guidance
The GMP Equalisation Working Group has published a further guidance note on GMP conversion. The guidance note is aimed at demonstrating how GMP conversion might be used in a proportionate and pragmatic way whilst awaiting further guidance or legislation from the government/HMRC. It discusses approaches that the working group is aware of either having been adopted or considered, and includes worked examples.
There is a Bill before Parliament which proposes to make changes to the existing legal framework on GMP conversion – the text of the Bill is not yet available, and Second Reading will take place in November 2021.
Read the GMP conversion guidance.
Latest TPR stakeholder research
The Pensions Regulator (TPR) has published the results of stakeholder research on TPR’s performance and effectiveness, which includes views of TPR’s response to the Covid-19 pandemic; the majority of respondents rated TPR’s Covid-19 response favourably. The research also includes some statistics on pension scams – over a fifth of respondents had direct experience of scams, and 16% reported a suspected increase in pension scams since the first Covid-19 lockdown.
Read TPR’s blog post.
Read the research results (under Perceptions trackers).