In this edition of the digest we provide a round-up on recent Pensions Regulator news including its consultation on a new code of practice for CDC schemes. We also report on the Pensions Ombudsman’s new Pensions Dishonesty Unit and the PPF levy ceiling for 2022/23, and end with an update on pensions dashboards.
The pensions regulator round-up
Consultation on new code of practice for CDC schemes
A consultation on a new code of practice for authorising and supervising collective defined contribution schemes was published by the Regulator on 25 January 2022.
The Pension Schemes Act 2021 set up the legislative structure for CDC schemes including a requirement for the Regulator to issue a code of practice relating to authorisation.
The code outlines how an authorisation application should be made, the matters that will be considered by the Regulator when reviewing an application, expected Regulator standards, and how CDC schemes will be supervised. The code will be expanded at a later stage to cover scheme closure and wind-up and accompanying guidance will also be published in due course.
The Royal Mail Collective Pension Plan is expected to be the first CDC scheme in the UK and is anticipated to be established later this year – how many other schemes will be set up remains to be seen. Royal Mail will be able to apply for authorisation as from August 2022. At present, the ability to set up a CDC scheme is restricted by the requirement for schemes to have a single or connected employers although the Government is actively looking at expanding the CDC market to multi-employer schemes and this could increase take-up.
Blog on protecting pension savers in 2022
In his 24 January 2022 blog, Charles Counsell OBE, Chief Executive of the Pensions Regulator, sets out the key Regulator aims and developments for pension savers in 2022. They include:
- The Regulator's work on pension scams – the Regulator wishes to see trustees taking a "decisive and common-sense approach" to the new transfer value regulations and for there to be more reporting – see our Insight for further details;
- Progressing the new defined benefit funding code of practice – the second consultation is expected in late Summer 2022 (Insight);
- Bringing in the Regulator's new single code of practice – expected at some point this Summer;
- Further embedment of the new Pension Schemes Act 2021 criminal powers which the blog reiterates are not intended to catch "ordinary commercial activity";
- Progressing common standards on value for money in DC schemes – see our Insight for details of the joint Regulator and FCA discussion paper;
- Diversity – improving diversity is a key goal of the Regulator and the Industry Working Group set up by the Regulator will publish an action plan in the next few months; and
- Management of climate-related risk – there needs to be more and improved integration of climate change into trustee decision-making. The Regulator will be stepping up its monitoring in this area.
None of these are new initiatives so will not come as much of a surprise to the pensions industry. However, it is useful to obtain the Regulator's view as to what will be the key priorities over the coming months, and they act as a helpful reminder to trustees as to what will need to be included on their schemes' business plans during 2022.
12th DC Trust Report published
The Regulator has published its 12th DC Trust Report which shows that the trend for consolidation of DC schemes is continuing with 27,700 schemes compared to 45,150 in 2011 and a drop of 2% since last year's report. The trend for consolidation is expected to continue especially given the new value for members' requirements which came into force as from 1 October 2021 (see our Insight for further details).
Pensions Ombudsman sets up Pensions Dishonesty Unit
The Pensions Ombudsman has set up a Pensions Dishonesty Unit which will investigate "allegations of serious breaches of trust, misappropriation of pension funds and dishonest or fraudulent behaviour by pension scheme trustees". This comes off the back of the recent Pensions Ombudsman Norton Motorcycles, Henry Davison, and the Grosvenor and Grovesnor cases in which the trustees were held personally liable for sums exceeding £10.9m, £2.4m and £1.3m respectively.
The main purpose of the Unit is to ensure that 'wrongdoers' repay money unlawfully obtained directly to scheme members. Certain affected schemes may also be eligible for compensation from the Fraud Compensation Fund (although compensation is not paid directly by those persons responsible but from the fund itself). See our Insight for details of the Pensions Ombudsman factsheet on the Fraud Compensation Fund for independent trustees.
PPF levy ceiling for 2022/23 set
The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) Order 2022 was laid before Parliament on 1 February 2022. This sets the levy ceiling for the 2022/23 financial year at £1,178,605,581.
The ceiling sets the maximum amount of pension protection levies that the PPF can impose. It increases in line with earnings increases over a relevant review period, which for the period concerned (1 August 2020 to 31 July 2021) was 7.2%.
The amount collected by the PPF has always been much less than the ceiling – the final levy rules for 2022/23 confirmed that the estimated levy would be £390m which is significantly lower than the ceiling.
For the first time, the order does not reference the PPF compensation cap following the Court of Appeal decision in the Hughes case that the cap amounted to unlawful age discrimination (see our Insight).
Pensions dashboards: consultation on draft regulations & PDP information on standards
On 31 January 2022, the DWP published a consultation on the draft Pensions Dashboards Regulations 2022 which asks for views on different policy issues together with an indicative draft of the regulations which "show how we envisage the policy would be turned into law".
The regulations include the requirements that will need to be satisfied for a pensions dashboards service to be 'qualifying' and those that trustees of registrable UK-based occupational pension schemes will need to meet together with relevant compliance provisions.
The consultation closes on 13 March 2022.
On the same day, the Pensions Dashboards Programme (PDP) published information on the mandatory standards which the PDP has delegated authority to set. The information can be used by those wishing to respond to the consultation. The PDP is also hosting several webinars during February 2022 on different topics connected to the consultation to help consultation responders – the DWP, the PDP, the FCA and the Pensions Regulator will be on the panel.