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: DC: investment in illiquid assets and consolidation; PASA FAQs on GMP equalisation administration; Future extension of CDC schemes; TPO factsheet on Early Resolution Service; Scheme pays deadlines.
- DC: investment in illiquid assets and consolidation
- PASA FAQs on GMP equalisation administration
- Future extension of CDC schemes
- TPO factsheet on Early Resolution Service
- Scheme pays deadlines
DC: investment in illiquid assets and consolidation
The government has published a consultation on facilitating investment in illiquid assets by defined contribution (DC) pension schemes. The combined consultation includes:
- A response to the November 2021 consultation on removing certain performance fees (often used in illiquid investments) from the scope of the charge cap that applies to default arrangements in DC schemes used for auto-enrolment. Following mixed responses to the proposals, the government will take more time to ‘fully understand all the concerns raised, engage further, and to explore how these concerns might be addressed’.
- Consultation on proposals to require relevant DC schemes to ‘disclose and explain’ their policies on illiquid investment and, for schemes with over GBP100 million of assets, to disclose the asset class allocation of their default fund.
- Consultation on draft regulations stopping certain employer-related investment (ERI) restrictions from applying to large authorised Master Trusts (those with 500 or more active employers). The consultation explains that ERI restrictions were implemented before Master Trusts were envisaged; the government believes the policy drivers behind preventing a scheme from investing in its employers do not apply in the same way in the Master Trust context. The restrictions would continue to apply to the Master Trust’s scheme funder, scheme strategist and persons connected to or associated with them.
- A response to the government’s June 2021 call for evidence on consolidation of the DC market. Taking into account the mixed feedback received, the government will not be introducing any new regulatory requirements with the sole purpose of consolidating the market in 2022. However, it will work closely with the Pensions Regulator to monitor the impact of the value for members assessment, which relevant schemes will start to produce this year.
The consultation ends on 11 May 2022.
Read the consultation.
PASA FAQs on GMP equalisation administration
The Pensions Administration Standards Association (PASA) has published FAQs designed to provide pragmatic guidance to administrators implementing GMP equalisation (GMPE). The FAQs cover the ‘look-back’ approach in assessing crossover points between member and comparator pensions in periods between pension increase dates; PAYE tax considerations when paying arrears and interest; practicalities relating to death benefits; checking lifetime allowance requirements; and commutation. The list will be updated as the implementation of GMPE projects progress and different approaches and solutions emerge.
Read the FAQs.
Future extension of CDC schemes
The DWP has published a press release setting out statements made by Guy Opperman (Minister for Pensions) on the ways in which the next phase of development for collective DC (CDC/collective money-purchase/CMP) schemes might be taken forward. Regulations come into force on 1 August 2022, setting out the framework for CDC schemes. Those regulations only permit CDC schemes for single or connected employers, but the Minister believes that this should be extended to multi-employer schemes and Master Trusts. The announcement confirms that a consultation is planned later this year.
Read the press release.
TPO factsheet on Early Resolution Service
The Pensions Ombudsman (TPO) has published a factsheet on its Early Resolution Service (ERS). It explains that the ERS is voluntary and provides an informal and streamlined approach to dispute resolution, allowing parties to resolve a complaint informally. It sets out when the ERS will look at a complaint (broadly, when TPO believes an informal resolution might be possible), the ERS process and what happens if the dispute is not resolved through the ERS.
Read the factsheet.
Scheme pays deadlines
Regulations will come into effect on 6 April 2022 extending certain deadlines in respect of Scheme Pays and the annual allowance tax charge. They include deadlines for provision of information by scheme administrators to HMRC and members, and employers to scheme administrators, where new details become available that affect an individual’s pension input amount for a previous tax year.
Read the regulations.