Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.
This week we cover topics including: TPR guidance for trustees regarding Russia’s military invasion of Ukraine; Finance Act 2022; TPR guidance: communicating the ‘stronger nudge’; TPO factsheets: scams, ill-health pensions and death benefits; Dormant Assets Act 2022; Latest HMRC newsletter; Tribunal: lack of knowledge was no excuse for failure to prepare chair’s statement; Tribunal: issues with pension provider were no excuse for failure to pay contributions; Dates for your diary: Pensions Academy Online, 7-11 March 2022, 9.30-10.30 am
The Pensions Regulator (TPR) has issued guidance for trustees regarding Russia’s military invasion of Ukraine, setting out its expectations in the light of volatility in investment markets and an expected period of heightened uncertainty.
In addition to a general call for schemes to be vigilant and to talk to their advisers about any action in relation to any scheme investment, risk management or employer covenant exposures, trustees should consider any action they may need to take to align with sanctions announced by the UK government. TPR also highlights the following issues:
- for DB schemes, short-term liquidity needs could be affected by margin calls as a result of market volatility;
- DB schemes should also consider any direct or indirect implications for the employer covenant (e.g. trading/supply chain links or the impact of rising fuel prices/foreign exchange risks);
- a heightened risk of cyber attacks: existing procedures may need to be reviewed; and
- a heightened risk of financial crime and scams.
TPR also expects trustees to consider whether investments remain aligned with the scheme’s statement of investment principles, including ESG considerations, but notes that pensions are long-term investments: ‘Aside from any short-term actions in relation to Russian investments due to divestment, sanctions, or change in appetite in relation to holding these investments, this means not making hasty, uninformed decisions about your overall portfolio.’
TPR also suggests that trustees may want to communicate with members about how they are managing risks to the scheme, and asks that trustees keep it informed about any significant issues or challenges that schemes or employers are facing as a result of the conflict, to help TPR build a picture of the wider impact on schemes.
Read the guidance.
View the UK government webpage on sanctions relating to Russia.
The Finance Act 2022 has now received Royal Assent. Pensions-related measures include:
- an increase to normal minimum pension age (NMPA) from 55 to 57 on 6 April 2028 (section 10). NMPA is the earliest age at which most individuals can take their pension benefits (other than on ill-health grounds or where they have a protected pension age);
- changes to the mandatory Scheme Pays facility, to extend the period for a member to give notice to their scheme administrator where there has been a retrospective change in their pension input amount (section 9);
- changes in connection with the McCloud remedy for public service pension schemes (section 11); and
- changes to discovery assessments (including in relation to pensions charges) (section 97).
There are no significant changes to these sections since the draft Bill that was published in November.
The Act includes protection for some individuals from the increase to NMPA. In principle, members of a registered pension scheme will be able to take their entitlement to benefits before age 57 (referred to as ‘2028 protection’) if:
- the rules of the pension scheme on 11 February 2021 included an unqualified right to take the entitlement to scheme benefits before age 57; and
- on or before 4 November 2021 the individual was a member of the scheme or was in the process of a substantive transfer to a scheme (meaning that there was an instruction to make a specific transfer which was completed after 4 November 2021, not a ‘casual enquiry’).
HMRC published guidance on this ‘2028 protection’ last month.
Read the Act.
Read HMRC’s guidance.
TPR has updated its guidance for DC schemes on communicating and reporting, to reflect the new ‘stronger nudge’ to guidance requirements. The requirements take effect from 1 June 2022 and will usually require schemes to offer to book an appointment with Pension Wise for a member who contacts them about making an application to access or transfer flexible pension benefits.
The guidance sets out how those requirements fit into schemes’ retirement communications and gives some suggestions on what TPR expects the relevant communications to contain. It includes a reminder that schemes need to update their processes to comply, and suggests that the offer to book a Pension Wise appointment should be made as early as possible, since applications cannot proceed until the trustees have confirmation that the member has received guidance or opted out. TPR also confirms that the requirements do not apply to applications that are already being processed before 1 June 2022.
Read the guidance.
The Pensions Ombudsman (TPO) has published factsheets for the public on some common areas of complaint: pension scams, ill-health pensions and death benefits. The factsheets set out some background on each issue and advice on what someone should do if they have a complaint in one of those areas, including first trying to remedy the problem with the relevant party, and then what TPO can investigate, what remedies they can provide and how to refer a complaint to them.
Read the factsheet on pension scams, ill-health pensions and death benefits.
The Dormant Assets Act 2022 has also received Royal Assent. The Act extends the Dormant Assets Scheme (DAS) to include some insurance and pension products. The DAS allows assets which have not been claimed to be transferred and used for good causes. Among other things, the Act brings certain benefits from regulated money purchase personal pension schemes into scope. Following transfer, an individual would no longer have a right to payment against the pension provider, but would acquire a right against the DAS.
Read the Act.
HMRC’s latest pension schemes newsletter (no. 137) incudes reference to the legislative changes to Scheme Pays reporting and payment deadlines in the Finance Act 2022 (see above) and in draft regulations; issues with fixed and enhanced protection in public service pension schemes in relation to the McCloud remedy; a request to encourage pension scheme members to notify HMRC as soon as possible if they have lost their lifetime allowance protection; and updates on Relief at Source and the Managing Pension Schemes service.
Read the newsletter.
The First Tier Tribunal has held that a lack of knowledge of the requirement to prepare a chair’s statement was not a reasonable excuse for non-compliance, and therefore it upheld a penalty notice issued by TPR. The judgment noted that legislation requires TPR to issue a penalty notice where the chair’s statement requirements are not met; there is no discretion. It also took into account that trustees are under a legislative duty to have the necessary level of knowledge and understanding to allow them to exercise their role and that guidance on the requirements was publicly available.
Read the decision.
The First Tier Tribunal has also been asked to consider an appeal against an escalating penalty notice issued by TPR after continued non-payment of contributions by an employer. The employer argued that it had not received notices from TPR and there were difficulties in communications with its pension provider which prevented it from remedying the situation. The Tribunal highlighted the statutory presumption that communications have been delivered once sent, and that ‘any responsible employer should ensure that effective arrangements are in place for effective and timely receipt, particularly with regard to important official government communications’. In relation to the difficulties in communicating with the pension provider, it found that there had been sufficient time for the employer to remedy the problem (having been granted extensions by TPR), but it had not taken the opportunity to do so, therefore there was no reasonable excuse for the material failure of compliance.
Read the decision.
Our Pensions Academy Online is taking place this week, covering the topics below:
7 March Money laundering and proceeds of crime – what trustees need to know
8 March Pension Schemes Act 2021: new offences and notifiable events – where are we now?
9 March Handling an investigation
10 March Legal update – including transfers, dashboards, single code, superfunds and more
11 March Climate change governance and reporting – theory and practice
Click here for more information or to register