Pensions legislation and case law update: the latest developments week ended 19 March 2021

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In this week’s digest we report on the Pensions Regulator’s single code of practice, DWP consultations on the Regulator’s strengthened powers and incorporating performance fees within the DC charge cap, the Pensions Minister’s call for data sharing on pension scams, the Regulator’s annual DB/hybrid landscape report, the rebranding of MaPS and the PLSA’s updated stewardship and voting guidelines.

Pensions Regulator consults on single code of practice

The Pensions Regulator (the Regulator) has launched a consultation on the first phase of its work codifying its existing 15 codes of practice into a single code. The aim is to have an online code which brings together and updates all relevant information on scheme governance and management in a clearer and more user-friendly way. 

The draft code runs to 149 pages and consists of 51 shorter, topic-based modules which replace 10 of the existing codes of practice and deals principally with governance and administration including the governance requirements introduced by the Occupational Pension Schemes (Governance) (Amendment) Regulations 2018. 

It should be noted that the code does not simply replicate the current content of the existing codes – in some instances new content and expectations have been added and, in other parts, additional material has been included so it will be important to understand the changes that have been made.

There will be a lot for trustees to get to grips with and although it may be some time before the draft code is finalised, trustees should begin preparing by reviewing their existing internal controls and procedures, and comparing them against the code so that they can assess what changes might be required. 

Our 'Pensions Regulator consults on single code of practice' insight discusses the draft code in more detail.

DWP consultation on regulations relating to the new CN and information gathering powers of the Regulator.

The Department for Work & Pensions (DWP) is consulting on two draft sets of regulations relating to the new contribution notice 'employer resources test' and the extended information gathering powers of the Regulator, which were introduced by the Pension Schemes Act 2021 (the Act). They are both expected to come into force on 1 October 2021.

Contribution notices and the employer resources test

The Act introduces two new grounds upon which the Regulator can issue a contribution notice to scheme employers and connected or associated parties. These are the employer insolvency test and the employer resources test. The tests were introduced because the existing regime is scheme focused yet most contribution notice cases have concerned acts which have impacted the employer rather than the scheme directly. Therefore, the Government wished to create an assessment which referenced the effect on the sponsoring employer.

The draft regulations set out the rationale and proposed approach for the employer resources test which is an act (or failure to act) that reduces the resources of an employer to an extent that is material relative to the estimated section 75 debt due to the scheme. 

The regulations set out what constitutes the resources of the employer and how the value may be 'determined, calculated and verified'. However, as the consultation notes, even where the 'employer resources' test is met the Regulator still needs to demonstrate that it would be reasonable to impose a contribution notice. In addition, where profitability has reduced, the employer may still have sufficient financial strength such that it can continue to support the pension scheme.

After considering several options the Government has proposed using profitability as the relevant measure (normalised profits before tax) which, although not straightforward, is less subjective than the other alternatives. The consultation sets out a proposed method of calculation and verification of this measure.

Information gathering powers of the Regulator

The draft information gathering powers regulations set out the content of interview notices, how the inspection powers might be used in multi-employer schemes and details of the penalty rates (a fixed penalty of £400 with an escalating penalty of £200 for each day of non-compliance for individuals. Non-individuals would have higher escalating rates starting at £500 on Day 1 increasing up to a daily rate of £10,000 on Day 20 and thereafter). Reference is made to the anticipated continued use of virtual meetings even when pandemic restrictions have been lifted. 


The consultation runs until 29 April 2021 and the Government aims to publish a response within 12 weeks (by 10 June 2021). 

Consultation on incorporating performance fees within the DC charge cap


The Government has published the Consultation: Incorporating performance fees within the charge cap which it announced would be forthcoming in the Spring Budget 2021 (see Insight Update). 

The consultation responds to that part of the earlier September 2020 DWP consultation: Improving outcomes for members of defined contribution (DC) pension schemes which, amongst other things, dealt with the measurement of performance fees and the part that the smoothing of these fees could play in facilitating the investment of DC funds in less liquid investment classes. It also sets out the proposed regulations which will help enable this.

Key point: 

Performance fees are frequently payable on illiquid investments (especially so on the more illiquid, higher risk type of investments such as venture capital and private equity) because the investments often involve specialised active management and the fees help incentivise the investment manager to realise higher returns. 

However, difficulties were identified in how performance fees are calculated and how they can be paid without breaching the 0.75% default fund charge cap. The draft regulations attempt to address these issues by allowing schemes to smooth performance fees over a 5-year period in the hope this will encourage trustees to make these more innovative funds available. The regulations are intended to come into force in October 2021. 

The Government plans to respond to this consultation and to the remainder of the September 2020 consultation, and to publish final draft regulations and statutory guidance in June 2021. 

Pensions Minister calls for pension schemes to share data on pension scams

The Pensions Minister, Guy Opperman, has written to around 90 different schemes calling on them to start sharing scam data with the Pension Scams Industry Group (the PSIG), the voluntary body set up to combat pension scams, so that a 'clearer' picture of the extent of the issue can be built up.

He said that "Pension schemes have a professional, ethical and moral duty to try and prevent their members being ripped off, and better data-sharing is a vital first step." This data is used by Project Bloom, the multi-agency taskforce which coordinates efforts to combat pension scams and fraud. 

To assist schemes can either join the PSIG's industry forum by contacting PSIG or ask their administrator to do so. 

Regulator's annual landscape report on DB and hybrid schemes

The Regulator's annual landscape report on DB and hybrid schemes 2020 covering 5,604 schemes shows that the decline in defined benefit accrual continues:

  • the number of open schemes has dropped from 11% in 2019 to 10% in 2020 (13% were open in 2012, the earliest date from which the data is measured); 
  • schemes closed to new members but open for existing members also decreased by 1% to 40% (48% in 2012); and 
  • the number of schemes closed to future accrual has increased from 44% in 2019 up to 47% in 2020 (28% in 2012)

The report also notes that schemes with over 5,000 members account for nearly 75% of each of the population total of assets, liabilities, and members but only make up approximately 7% of the total number of schemes. In contrast, those schemes with fewer than 1,000 members account for around 80% of the total number of schemes but only around 10% of total assets, liabilities and members.

Maps to launch single brand for consumers in early June 2021


The money and pensions service (maps) provides free and impartial money and pensions guidance to the public, currently through:

  • the Money Advice Service – money advice including in relation to debt;
  • The Pensions Advisory Service – information and guidance about pensions; and
  • Pension Wise – help for the over 50s about their pension options

MaPS has released details of its plans to bring these existing brands into one single brand called MoneyHelper, which should make it simpler for consumers to locate and access the support provided. Pension Wise will carry on as a named service under the MoneyHelper umbrella.

Key point: 

Bringing the current MaPS services together should help consumers when seeking assistance on money and pension matters. Schemes will need to ensure that they are ready to signpost the new service when it goes live and trustees should liaise with the scheme administrators to update relevant member communications. MaPS will be producing a toolkit and guide to assist in the changeover process.

PLSA'S stewardship and voting guidelines updated to take account of pandemic and new climate change regulations


The Pensions and Lifetime Savings Association (the PLSA) publishes annual Stewardship and Voting Guidelines, which give practical guidance for schemes as to how to exercise votes at AGMs. This year's update follows a significant review which was undertaken the preceding year and which has concentrated on making sure that the guidelines 'remain relevant' following the upheaval caused by the pandemic and also regulatory changes. 

Key point: 

The press release accompanying the 2021 Stewardship and Voting Guidelines notes in particular that: 

  • AGMs: although the PLSA support the introduction of virtual AGMs during the pandemic, because of concerns that this format can diminish investor engagement, it advises voting against making these permanent rather than linking them to Government policy or with an attaching sunset clause;
  • Workforce and remuneration practices: the impact of the pandemic should be considered alongside what financial support was accepted from the Government and how this interacts with workforce and remuneration practices, and the perception of these by stakeholders; and 
  • Climate change: the guidance has been strengthened to take account of the Taskforce on Climate Related Financial Disclosures reporting requirements on premium listed companies.

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