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: the Finance Bill; a consultation on increasing the levy ceiling for the fraud compensation levy; and an update on projects by the Pensions Regulator.
- Finance Bill: government closes NMPA ‘transfer window’
- Fraud compensation: consultation on increasing the levy ceiling
- Update on TPR projects
- GMP conversion: Bill published
- Latest HMRC newsletter
- Sustainability update
- New TPO factsheet: determinations
Finance Bill: government closes NMPA ‘transfer window’
Following the Autumn Budget, the Finance (No. 2) Bill has been published; pensions-related measures include:
- 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 (clause 9);
- the increase to normal minimum pension age (NMPA) from 2028 (clause 10);
- changes in connection with the McCloud remedy for public service pension schemes (clause 11); and
- changes to discovery assessments (including in relation to pensions charges) (clause 95).
Significant changes have been made to the proposals for implementing the proposed increase to NMPA from age 55 to age 57 in 2028, following the consultation on draft legislation. The government had originally planned to introduce a window so that individuals would have an opportunity to join a qualifying pension scheme by 5 April 2023 in order to maintain an NMPA of 55. Following consultation feedback, it now proposes to provide protection for members who before 4 November 2021 had a right under the scheme rules to take their benefits at or before the existing NMPA (including individuals who were in the process of transferring into such a scheme before that date, provided the transfer is completed). However, the government has not changed its view that in order to meet the conditions for protection, the scheme rules must provide an ‘unqualified right’ to take benefits before age 57 (that is, the rules must specify age 57, not simply refer to NMPA). The requirement for rights to be ‘unqualified’ is not expressly stated in the legislation, and HMRC is expected to provide further guidance on this in due course. The change to the transfer window was not mentioned in the Autumn Budget; in a statement to Parliament, the government said that giving prior notice of the closure of the window on 3 November 2021 could have led to unnecessary turbulence in the pensions market and consumer detriment (including scam risk).
Second Reading is scheduled for 16 November 2021.
Read the Bill.
Read the updated policy paper.
Read the Parliamentary statement.
Fraud compensation: consultation on increasing the levy ceiling
The government is consulting on increasing the ceiling for the fraud compensation levy from the levy year 2022/23. This had been expected for some time, as the Fraud Compensation Fund has insufficient funds to meet expected future claims, following a High Court decision about the eligibility of scam schemes to make a claim on the Fund. The government recently passed legislation to permit a loan (with the intention that this would be repaid using levy revenue).
Regulations currently set the levy ceiling at 75p per member for eligible occupational schemes and 30p per member for master trusts. In 2021/22 the levy was set at the maximum rate.
The government is proposing that the levy ceiling be set at 65p per member for master trusts and £1.80 per member for other eligible occupational schemes. As part of the consultation, the government is asking about the impact of the rise on schemes and businesses, and is seeking information about how pension schemes may absorb these costs or whether these may be passed on to members or scheme employers. However, it is not consulting on a ‘no change’ option as it does not believe that preserving the current ceiling is a realistic option.
The consultation closes on 10 December 2021.
Read the consultation.
Update on TPR projects
The November 2021 Regulatory Initiatives Grid contains an update on expected milestones for some ongoing projects by the Pensions Regulator (TPR), including:
- DB funding: the full response to the first consultation and the launch of the second consultation are planned for Q1 2022.
- Single Code: The consultation response and final code are to be published in Q1/2 2022.
- Pension scams pledge: TPR is planning engagement in Q4 2021 to support new regulatory expectations around pension transfers, in connection with the upcoming changes to transfer rights.
The document also contains information on projects by other bodies, including the Financial Conduct Authority (FCA) and the Information Commissioner’s Office.
Read the Grid.
GMP conversion: Bill published
A Private Member’s Bill before Parliament proposes changes to the legal framework on GMP conversion. The Bill has now been published, and Second Reading is scheduled for 26 November 2021. The Bill aims to:
- clarify that the legislation applies to survivors as well as earners;
- provide powers to specify who must consent to the conversion and the conditions that must be met in relation to survivors’ benefits; and
- remove the requirement to notify HMRC.
Currently the Bill does not include any proposed amendments to tax legislation.
Read the Bill.
Latest HMRC newsletter
HMRC’s latest pension schemes newsletter (no. 134) includes a discussion of measures announced in the autumn Budget; confirmation that some temporary Covid-19 related easements are being extended until 31 March 2022; a reminder about annual declarations for schemes using relief at source; and an update on the Managing Pension Schemes service.
Read the newsletter.
This week has seen further sustainability-related developments that will be of interest to pension schemes:
The Investment Consultants Sustainability Working Group has published a new template questionnaire designed to improve the engagement reporting delivered by asset managers and platform providers and to help investors to evaluate asset managers’ engagement activities: read the guide.
The government has published its response to the consultation on mandatory climate-related financial disclosures by publicly quoted companies, large private companies and limited liability partnerships (LLPs) – draft regulations to require certain companies to provide climate-related financial disclosures in their strategic report have been laid before Parliament (with further regulations for LLPs to follow). Read more.
a discussion paper on the new Sustainability Disclosure Requirements and investment labelling (the deadline for comments is 7 January 2022). The feedback will inform the development of policy proposals to be consulted on in Q2 2022. Read the discussion paper.
COP26 has seen a number of announcements and commitments: read our daily briefing on the Countdown to COP26 and beyond blog.
New TPO factsheet: determinations
The Pensions Ombudsman has published a new factsheet on determinations (decisions by the Ombudsman), including publication, compliance with directions, and appeals.
Read the factsheet.