Pensions UK: What's new this week - March 2021 #2

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Budget: pensions-related announcements

This year’s Budget contained very few pensions-related announcements:

  • The Coronavirus Job Retention Scheme is being extended until September 2021. In April, May and June, employers will only be required to pay National Insurance contributions and pension contributions. From July, the government will also introduce an escalating employer contribution towards the cost of unworked hours (10% in July, 20% in August and 20% in September).
  • The standard lifetime allowance will be frozen for the tax years 2021/22 to 2025/26 at the current level of GBP1,073,100. Currently the Finance Act 2004 provides for the standard lifetime allowance to be increased in line with CPI; this will be amended by the upcoming Finance Bill. Read the policy paper.
  • The Bill will provide for collective DC schemes to operate as registered pension schemes for tax purposes.
  • The government will very shortly launch a consultation on whether the inclusion of certain costs within the charge cap for default funds in auto-enrolment schemes affects their ability to invest in non-standard assets. It will also publish draft regulations on smoothing certain performance fees over a multi-year period, following related proposals last September. Read about the extension.

Pension Schemes Act 2021: timetable for next steps

The government has announced the next steps for the Pension Schemes Act 2021, and related regulations:

  • It will consult in the spring on most of the draft regulations concerning new powers for the Pensions Regulator (TPR), and bring into force the powers and the new criminal offences in the autumn. A separate consultation on the new duty to notify TPR and pension scheme trustees in relation to certain events will follow later in the year, with the new requirements to be commenced as soon as practicable afterwards.
  • The regulations on climate change related duties (currently under consultation) will be laid before Parliament this summer with the requirements being phased in from this autumn. Read about the consultation.
  • It plans to consult in early summer on draft regulations to limit statutory transfer rights and on collective DC schemes, with the transfer restrictions to be commenced from early autumn.
  • It will consult later this year on the draft regulations on changes to DB funding and on the proposed regulations for pensions dashboards.

Read the statement.

Silentnight: TPR announces settlement, publishes report

TPR has announced a settlement with HIG Group, a private equity firm, under which GBP25 million has been paid to the Silentnight pension scheme. This concludes a long-running TPR investigation following the Silentnight pre-pack administration in 2011, when HIG acquired the business.

TPR’s case for Contribution Notices was that the targets (certain members and executives, or former members and executives, of HIG) acquired bank debt and used their position as lender to bring about the unnecessary insolvency of Silentnight, and took steps to buy the business at below market value as part of the subsequent administration process. TPR issued a Warning Notice in 2014, on the basis that the group’s business and assets had been sold at an undervalue; in 2016, it issued a second Warning Notice, which argued that, without HIG’s involvement, Silentnight would have been able to refinance and continue trading (and supporting the scheme). HIG unsuccessfully sought to judicially review the decision to issue the second Warning Notice.

The targets disputed TPR’s case, including whether they were ‘connected or associated’ for the purposes of issuing a Contribution Notice. TPR considered that the targets were associated on a number of grounds:

  • The ‘control’ TPR considered HIG was given under the share sale agreement and revolving credit facility, which prohibited the passing of shareholder resolutions without HIG consent.
  • Shadow directorship (TPR considered Silentnight’s directors acted in accordance with HIG’s directions).
  • De facto directorship, as some directors of the sponsoring employers acted as if they were directors of the entity used by HIG to acquire the employers’ business and assets before they were formally appointed.

These grounds were factually disputed by HIG, and TPR noted that its position involved some novel arguments that had not previously been tested in court, but which TPR considered to be valid.

The matter was settled with no admission of liability, and the scheme is expected to transfer to the Pension Protection Fund. Separately, the Financial Reporting Council has been conducting disciplinary proceedings into the administrator in connection with this matter.

TPR’s report on the investigation states that it would not ordinarily anticipate targeting lenders with its powers, as it would not expect lenders to bring about unnecessary insolvencies. However, it will be alert to any cases of unnecessary insolvency to sever a scheme from its employer, and will pursue those cases.

Publication of the regulatory report in this case is timely, as pension schemes, employers, advisers and lenders are considering the potential ramifications of the Pension Schemes Act 2021 (and, in particular, the new criminal offence/financial penalty for conduct risking accrued scheme benefits).

Read TPR’s regulatory report.

Changes to general scheme levy published

New regulations set out the rates of the general levy for occupational and personal pension schemes for the financial years beginning with 1 April 2021, 1 April 2022 and 1 April 2023. The government had consulted on proposals to increase levy revenue to meet the expenditure of levy funded bodies; it has now published the consultation responses together with new regulations specifying different rates by scheme type and membership size; these rates escalate over the three-year period. All schemes will see some increase, but there is a greater increase in the per member rate for DB/hybrid and money purchase schemes as compared to master trusts. The regulations come into force on 1 April 2021.

Read the regulations.

Read the consultation response.

Investment consultants, fiduciary management

The government has announced that the current Competition and Markets Authority (CMA) regime on strategic objectives for investment consultancy providers and competitive tenders for fiduciary management services will remain in place until next year.

The government has consulted on replacing the CMA rules, but its consultation response and regulations for the new regime have been delayed and are now expected to be published in the first half of 2022. In the meantime, trustees must continue to comply with the current rules, including reporting compliance to the CMA.

Read the statement.

New PASA guidance on preparing for pensions dashboards

The Pensions Administration Standards Association (PASA) has published guidance on preparing for pensions dashboards, plus a one-page list of actions that schemes should be taking now to prepare for the rollout.

As part of preparing for the rollout, PASA recommends that the data requirements for dashboards should now be incorporated into schemes’ wider data management plans – some trustees may have already started considering this with administrators, following the publication of guidance and recommended actions by the Pensions Dashboards Programme. PASA’s recommended actions include locating and uploading non-digital records to systems, engaging with administrators and suppliers, and considering processes to ensure the accuracy of personal data items displayed on records.

Read the PASA guidance and one-page list.

Read the PDP guidance and list of recommended actions.

Latest HMRC newsletter

HMRC’s latest pension schemes newsletter (no. 128) contains information on matters including the recent Budget, the extension of temporary changes to pensions processes in connection with Covid-19 until 30 June 2021, and information for schemes operating relief at source.

Read the newsletter.

Annual GMP uprating order

The annual uprating order for guaranteed minimum pensions (GMPs) will come into force on 6 April 2021. It specifies 0.5% as the rate at which the GMP element of an individual’s occupational pension entitlement accrued in tax years 1988/89 to 1996/97 must be increased.

Read the order.

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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