Pensions: What's new this week - January 2021 # 3

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Pension Schemes Bill awaits Royal Assent

The Pension Schemes Bill has completed its passage through Parliament and is now waiting for Royal Assent at a date to be announced. Last week the House of Lords agreed with the version of the Bill that had been passed by the Commons.

Significant detail remains to be confirmed in regulations and guidance, so the new provisions will take effect in stages. For example, further regulations are required in relation to the changes to the DB funding regime, followed by a TPR consultation on the new DB funding Code in the second half of 2021. A consultation on draft regulations implementing the new governance and risk management arrangements relating to climate risks and opportunities is expected shortly. The government has said that it expects TPR’s strengthened powers and the new criminal offences to be effective from autumn 2021.

An updated Parliamentary library briefing on the Bill is also available.

DB/hybrid scheme return: TPR updates information

TPR’s guidance on DB/hybrid scheme returns has been updated, noting that scheme returns will be issued from mid-February rather than the end of January – the deadline for submission will be 31 March 2021. TPR will confirm the final questions in February before the scheme return notices are issued.

Depending on system updates, DB-only schemes may be asked to provide a website link to their published statement of investment principles, and their assessment of the employer covenant (and where it would sit within TPR’s grading system).

TPR continues to encourage schemes to download past returns as these may not be available in future, and has extended the potential cut-off date to 29 January 2021.

New report: trustee decision-making

A new report on the decision-making processes of pension scheme trustee boards has been published by the Institute and Faculty of Actuaries. The report aims to raise awareness of the potential for forms of behavioural bias and other factors such to affect trustee decision-making. It suggests practical actions trustees can take to improve the quality of their decision-making, such as considering whether excessive information is being presented for consideration, separating information from advice and reviewing other aspects of meeting dynamics. The report may be useful for trustee boards considering a review of governance practices.

Auto-enrolment trigger and thresholds: 2021/2022

The government has announced that for 2021/22:

  • the auto-enrolment earnings trigger will remain at £10,000; and
  • the lower limit of the qualifying earnings band will remain at £6,240, and the upper limit of the qualifying earnings band will increase to £50,270 (from £50,000).

The government has laid a draft order before Parliament for approval, which would amend the qualifying earnings band from 6 April 2021; the draft order also sets out rounded figures for pay reference periods of less than a year.

Annual GMP uprating order

A draft of the annual uprating order for guaranteed minimum pensions (GMPs) has been laid before Parliament. Once approved, this 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.

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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