This article looks at the very latest news that Trustees and Pension experts need to be aware of. It includes the latest update from the Pensions Regulator on the challenges faced by trustees and an update from the Pension Protection Fund as well a round-up of the latest legislative changes and pensions news.
Pension Schemes Act 2021: commencement regulations for collective money purchase schemes
The Pension Schemes Act 2021 (Commencement No. 5) Regulations 2021 were made on 8 December 2021 – these brought into force on 13 December 2021 certain provisions in the Pension Schemes Act 2021 regarding the new collective money purchase schemes framework.
The provisions include a requirement that the Pensions Regulator issue a code of practice relating to authorisation, permission for regulations relating to restrictions on administration charges, and certain other related minor and consequential amendments.
PPF blog: what is the Purple Book?
The Pension Protection Fund has published the 16th edition of The Purple Book which provides data and analysis of UK defined benefit pension arrangements.
Accompanying this publication is an interesting blog which outlines what The Purple Book reveals and how it is used by the PPF. The blog explains that the book provides a comprehensive overview of the schemes eligible for the PPF and allows the PPF to analyse risks and follow trends so that it can ensure it can pay compensation for both current and future members.
The current data confirms that the number of eligible DB schemes continues to decrease with 5,220 presently compared to 5,327 last year. The deficit of schemes is £129bn – this represents the ultimate risk to the PPF should all scheme employers enter insolvency and is used to observe exposure. The aggregate funding ratio went up to 102.8% (94.9% last year).
Recent trends include not just a decrease in total numbers but a continuation of schemes adopting derisking and closing to future benefit accrual (48% closed, compared to 46% in the previous year).
Regulator blog on the challenges of pension scheme trusteeship
A blog post published by the Pensions Regulator last week details the responsibilities and challenges faced by the trustees of pension scheme.
The blog focusses upon trusteeship in challenging times - although corporate conditions are not as difficult as perhaps anticipated, many employers have raised debt levels and the future overall is uncertain. There is likely to be additional activity in mergers & acquisitions and restructuring which can lead to stress on sponsor support for a scheme. Trustees are urged to remain ‘vigilant’.
The blog confirmed that the Regulator has contacted the trustees of over 400 defined benefit pension schemes to check whether they have considered the risks surrounding their sponsoring employer and its ability to support the scheme properly. The blog notes that 73% of schemes contacted had confirmed with the Regulator that they had considered its guidance on the issue.
Finally, the blog comments on the new Regulator powers in the Pension Schemes Act 2021 noting that initial feedback points to improved engagement from employers and other parties.
Nicola Parish, the Executive Director of Frontline Regulation at the Regulator, writes that "We remain clear that trustees are the first line of defence for savers. We, as the regulator of workplace pensions, will support trustees where appropriate. But we will use the full force of our enhanced powers if we feel a scheme is not being treated fairly by a sponsoring employer, or if a trustee board is not acting in the best interest of savers".
It is clear that the Regulator believes there are uncertain and, in some cases, challenging times ahead for trustees. Trustees should ensure they are familiar with the Regulator's guidance on protecting schemes from sponsoring employer distress and that they have regular engagement with the employer so that 'key risks' can be spotted at an early stage and dealt with effectively.
Consultation published on McCloud remedy for NHS pension schemes
On 9 December 2021, the Department of Health and Social Care launched a consultation on draft regulations which will amend the NHS pension schemes so that the first part of the McCloud remedy can be implemented. This involves moving all members, regardless of age, from the current legacy NHS schemes into the 2015 NHS Pension Scheme from 1 April 2022. A second set of draft regulations are under consideration and will be consulted on separately in 2022. The consultation closes on 20 January 2022.
There have already been consultations on draft regulations amending other public service pension schemes – you can find out more in our Insight Updates 1, 2 & 3.
FCA, TPR and MoneyHelper joint statement on Old British Steel Pension Scheme
On 6 December 2021, the Financial Conduct Authority, the Pensions Regulator and MoneyHelper issued a joint statement following the exit of the Old British Steel Pension Scheme from a Pension Protection Fund assessment period. Benefits are going to be secured under a buyout with Pension Insurance Corporation which is anticipated to complete by late Summer 2022.
The statement has been issued in anticipation of potential transfer requests being made post-exit (transfers were not permitted during the assessment period but are now allowed). It explains that the FCA is liaising with the trustees to 'monitor' requests and adviser firms.
The current oversight follows unsuitable financial advice being provided to a number of former British Steel Pension Scheme members to transfer out of the scheme into a personal pension instead of to a replacement final salary scheme or the Pension Protection Fund. Collectively, approximately 7,700 members chose to transfer benefits amounting to £2.8bn out of the scheme.
The joint statement concludes by reiterating that all three bodies "believe transferring out of a DB pension scheme is unlikely to be in the best interests of most consumers".
The FCA's role in the British Steel case is due to be investigated by the National Audit Office in Spring 2022 (see our October Insight).
Pensions dashboards: PASA guidance on data matching convention choice
On 7 December 2021, the Pensions Administration Standards Association published initial Data Matching Convention Guidance which sets out how pension schemes should decide how they will compare 'find requests' from dashboard users alongside scheme records. The guidance explains that the matching choice will be determined by how accurate the scheme-held personal data is.
Most schemes will match on three key elements of data, being surname, date of birth and national insurance number. Schemes may wish to add forename to these key parts. Schemes should aim to have a 'high level of confidence in the accuracy of' these core elements.
The Director and Chair of the PASA Pensions Dashboards Working Group makes the point that "the scale of the job at hand means we must make an early start" and that the guidance is "essential reading for all scheme trustees, pension providers and their suppliers".
Trustees should liaise with their Scheme administrators to see what preparatory steps should be taken to ensure readiness for the expected launch of pensions dashboards during 2023 and 2024.