In this insight, we report on all the latest key pensions developments including TPR’s updated superfunds guidance, the latest PPF 7800 funding figures and the DWP’s updated dashboards deferred connection guidance.
Updated TPR superfunds guidance
The Pensions Regulator (TPR) has updated its DB superfunds guidance following a review it committed to undertaking within three years of the initial 2020 guidance. The updated guidance shortly follows the Department for Work and Pensions (DWP) 11 July 2023 announcement of legislation for superfunds. This, and the DWP’s call for evidence on ‘Options for Defined Benefit schemes’ which considers defined benefit (DB) consolidation, have both been welcomed by the Pensions Regulator.
The main areas where the guidance has been updated are:
- Adjustments to assist the transfer process, including lengthening the Gateway period so that estimates of funding levels, and demonstration that the Gateway tests are met, remain valid for nine months. This is clarifying the Pension Regulator’s views on when it might be appropriate for a scheme to consider transferring, and providing additional time (up to nine months) to show that its capital expectations have been met.
- Changes to the Regulator’s funding expectations – moving the discount rate from Gilts+0.5% to Gilts+0.75%.
- ‘Signalling a change’ to the Regulator’s position on profit extraction, with additional industry engagement to follow and a future update – the Pensions Regulator agrees with the DWP’s consultation response that extraction should be built into the system.
- More clarity on assessment process expectations including collective competence and a new appendix that pulls together supervision information.
The Regulator’s superfunds guidance for prospective ceding trustees and employers has also been updated – the Gateway part has been changed together with other small clarification updates.
PPF 7800 Index shows DB schemes funding has increased
The latest Pension Protection Fund (PPF) 7800 Index Report, setting out the estimated funding position on a section 179 basis as at the end of July 2023 of the eligible 5,131 DB schemes, shows that:
- the aggregate surplus of these schemes increased over the month to £446.1bn from a surplus of £437.0bn at the end of June 2023;
- total assets were £1,407.5bn and total liabilities were £961.4bn;
- the funding ratio increased from 145.8% at the end of June 2023 to 146.4% at the end of last month; and
- there were 458 schemes in deficit and 4,673 schemes in surplus.
Pensions dashboards: DWP update deferred connection guidance
On 9 August 2023, the Department for Work and Pensions updated its Pensions dashboards: guidance on deferred connection to take account of The Pensions Dashboards (Amendment) Regulations 2023 which, amongst other things, introduce a new single connection deadline of 31 October 2026.
In summary, trustees can defer connection by up to 12 months if they can show that in good faith, before 9 August 2023 (the dates the amending regulations came into effect), they had begun transferring data to a new scheme administrator and/ or they were contractually obliged to retender the scheme administration and the timing conflicts with the scheme’s staging deadline. In addition, it must be demonstrated that complying with the connect deadline would be either disproportionately burdensome or would put members’ personal data at risk.
Deferral applications must be made by 8 August 2024. DWP will contact those who made applications before 9 August 2023 to confirm the position. Further applications can be made even where a previous application was not successful.
TPO member factsheet on incorrect pension information complaints
The Pensions Ombudsman has published a factsheet for members on the action that they can take if they have a complaint about being provided with incorrect pension information, which is a common topic of complaints. It explains what this type of complaint covers, and that in most cases members will not be entitled to rely on the incorrect information, but a scheme may have to make good any loss caused by the provision of incorrect information (or in limited cases provide an entitlement to higher benefits). It also tells a member what to do if they have a complaint, common types of complaint that can be considered by the Ombudsman, and what decisions the Ombudsman can make.
APPT review of professional trustee accreditation process
On 8 August 2023, the Association of Professional Pension Trustees (the APPT) published its internal review of the APPT accreditation framework ‘to inform debate’ regarding the Mansion House evidence call on trustee skills, capability and culture, which asks whether the current framework is sufficient.
In summary, the APPT Council concluded that the accreditation scheme has ‘worked well’ and would be fit for purpose should a mandatory accreditation regime be introduced in the future. The review sets out other findings including that there should be further consideration of whether accredited professional trustees should have a higher level of qualification than currently required and that the APPT should ask the PMI to update its syllabus and questions for the two exams that form part of the accreditation process.
MaPS evidence review into pension scams
On 10 August 2023, the Money and Pensions Service (MaPS) published an evidence review into pension scams in the UK. It includes sections on the impact, types of scam and tactics, key risk factors and current trends together with recommendations of strategies and interventions that stakeholders can use to reduce risk and provide improved support to those impacted.
Key findings include:
- There is underreporting and inconsistency in collection of data – this causes difficulties in assessing the scale of the problem.
- Tactics change constantly – for example, computer misuse crimes have gone up by 25% since 2020. However, it is difficult to gather data on present trends because of underreporting and gaps in data.
- Identified potential future scams include an increase in pension liberation when the normal minimum pension age increases from 55 to 57 in April 2028 and ones around pensions dashboards when savers may find out they have smaller pots.
- Tactics used by scammers vary but often refer to ‘scarce’ opportunities that require urgent action as this exploits individuals’ natural behaviour to view these as more desirable.
- Although anyone is at risk of a scam, there are certain risk factors including higher levels of education, overconfidence in financial matters, coming up to retirement with a perceived inadequate income, and stress or isolation issues.
- There is a material risk that people are ‘re-targeted’ especially around redress and recovery and scammers may circulate target contacts between themselves.
Proposed solutions include:
- intervention solutions, such as a further ‘point of reflection’ after the Pension Safeguarding Appointment, which members must attend on identification of an amber flag in the transfer process;
- encouraging uptake of support services by simplified access, reducing stigma, and encouraging those in the affected person’s social network to refer them to support; and
- reducing re-targeting by emphasising the risk during relevant contact points, having a caseworker and contacting the member after an amber-flag transfer to help them identify a scam.
No specific action is required from trustees, but they should note the key findings and make sure that generally they keep up to date with developments. As ever, scammers evolve, and it is crucial that the industry adapts as necessary so that adequate protection can be provided. The report provides some useful and practical recommendations as to how protection might be strengthened including ways MaPS can assist.
PASA guidance on DB benefit accuracy
On 14 August 2023, PASA published new guidance on benefit accuracy for DB schemes, which is designed to support trustees in providing accurate benefits. The guidance has five main sections:
- benefit specification – this covers the basis for calculating all of a scheme’s benefits;
- data specification – this sets out the data items that are needed to construct benefits;
- benefit audit – which reviews the accuracy of benefits put into payment;
- benefit calculation automation; and
- the key considerations for commissioning independent benefit and data audits.