Public Service Pensions and Judicial Offices Act 2022
The Public Service Pensions and Judicial Offices Bill received Royal Assent on 10 March 2022. As explained in our Insight, this legislation primarily introduces provisions to remedy the age discrimination identified in the McCloud case.
There is one other point to note. At a late stage in the Bill's progression through Parliament, a regulation-making power within the Public Service Pensions Act 2013 was introduced which will permit guidance or directions to be issued to public service administering authorities to cover investment decisions which "it is not proper for the scheme manager to take in light of the UK's foreign and defence policy".
This provision has been introduced following the 2020 Palestine Solidarity Supreme Court case in which it was held that Government guidance issued in September 2016 to the Local Government Pension Scheme seeking to prevent pension policies being used to pursue boycotts, divestment and sanctions other those which aligned with Government foreign and defence policy even where relevant non-financial consideration investment tests would be met was unlawful as it went beyond the Secretary of State's powers under the 2013 Act.
The Government had to remove the unlawful passages from the guidance because of the ruling. The new provision gives the Secretary of State the specific power to issue guidance.
Online Safety Bill
The government is to amend the Online Safety Bill to require the "largest and most popular social media platforms and search engines" to stop paid-for fraudulent advertisements showing on their services. This should prove to be a positive development in the fight against pension scam activity and has been welcomed by Stephen Timms MP, Chair of the Work and Pensions Committee.
Collective money purchase schemes regulations
The Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022 were formally made on 8 March 2022 and will come into force on 1 August 2022. They allow single or connected employers to set up a CMP scheme – as we reported in our February Insight there are plans to allow multi-employer CMP schemes as from later this year or in 2023.
There is also another set of regulations relating to CMP arrangements, the Occupational Pension Schemes (Collective Money Purchase Schemes) (Modifications and Consequential and Miscellaneous Amendments) Regulations 2022, which will amend existing pensions legislation – these should be laid before Parliament during March 2022.
Fraud Compensation Levy regulations coming into force on 1 April 2022
Regulations have also been made which increase the fraud compensation levy as part of the Government's response to a November 2021 consultation on increasing the levy ceiling. As announced by the Fraud Compensation Fund (the FCF) team at the Pension Protection Fund the levy will rise as from 1 April 2022 from 75p to £1.80 per member (and from 30p to 65p per member for master trusts).
As our November 2021 Insight explained, the recent case of Board of the PPF v Dalriada Trustees Ltd confirmed that, in certain cases, victims of pension scams can receive compensation from the FCF. However, the assets in the FCF are insufficient to fund the increased level of claims which will be made because of the case. The levy needs to be increased to allow for repayment of the loan which the Secretary of State is making to the PPF (which administers the FCF) to increase the FCF's assets. To date, the FCF has received £47.3m worth of claims and, as at 31 March 2021, there were 100 pending applications amounting to £358.1m.
The Pensions Regulator updates Russia/Ukraine guidance
In our 4 March Insight we reported on the Pensions Regulator's guidance on the Russia/Ukraine conflict. This has since been updated to include wording on divesting Russian-held scheme assets. The Regulator recognises the difficulties disposition presents and notes the need to refer to the Financial Conduct Authority's financial sanctions guidance when divesting to make sure that applicable sanctions are satisfied.
Latest PPF 7800 Index shows funding has decreased
The PPF 7800 Index Report setting out the estimated funding position on a section 179 basis as at the end of February 2022 of the eligible 5,215 DB schemes shows that:
- The aggregate surplus of these schemes decreased over the month to £133.6bn from a surplus of £146.4bn at the end of January 2022;
- The funding ratio decreased from 109.1% at the end of January 2022 to 108.4% at the end of February; and
- The aggregate deficit of the schemes in deficit increased to £83.1bn from £80.9bn at the end of January 2022.
National audit office's report into the British Steel Pension Scheme case
The National Audit Office's 18 March 2021 report of its investigation into the Financial Conduct Authority's regulation of DB pension transfer advisers and the delivery of compensation to members affected by the British Steel Pension Scheme case reveals that an estimated 47% of financial advice provided was unsuitable with a further 32% being 'unclear' as to suitability and that redress has not provided full compensation.
Recommendations as to how to help prevent issues arising in the first place include looking at how the FCA and HM Treasury work together, considering what more can be done around decreasing the risks of transferring out and how to improve reaching impacted individuals given the small number that have complained.