Pensions Insight: 9 May to 15 May 2023
In this Insight we provide an update on the Retained EU Law (Revocation and Reform) Bill, and report on the Regulator’s updated sponsoring employer in distress guidance, the latest PPF 7800 Index figures and a TPO leaflet on the differences between it and the Financial Ombudsman Service.
Retained EU Law (Revocation and Reform) Bill – update
Among other provisions, the Retained EU Law (Revocation and Reform) Bill contains a ‘sunset clause’ that will repeal the majority of retained EU law at the end of 2023 unless it is specifically saved by secondary legislation. There has been considerable uncertainty around which legislation will be repealed and which will be retained under this sunset provision.
The Bill could potentially impact pensions where it is influenced by EU law, for example, the Bauer case on PPF compensation (see our Insight).
Retained EU law was a term created by the European Union (Withdrawal) Act 2018 (the 2018 Act) and refers to legislation deriving from the EU. The 2018 Act took EU law as it applied to the UK when the Brexit transition period ended on 31 December 2020 and continued to apply this under UK law. Retained EU law that applies after the end of 2023 will be renamed assimilated law.
On 10 May 2023, the Government published amendments it proposes to make to the Retained EU Law Bill – these will be considered during the report stage of the Bill in the House of Lords which was scheduled to begin on 15 May 2023. The tabled amendments include a significant change in how the Government plans to approach the 31 December 2023 automatic revocation of certain retained EU law – instead of automatically removing all retained EU law that has not been deliberately saved, the Government wishes to specifically say which retained EU laws it intends to revoke. This switch in approach is intended to address concerns raised by business and other organisations as to the level of uncertainty and the House of Lords around a lack of parliamentary oversight.
The Government’s proposed amendments do not alter other significant parts of the Bill – for example, certain retained EU rights and obligations originating from EU treaties and EU directives will still be repealed under the sunset clause, and the Bill will still abolish the principle of the supremacy of EU law and general principles of EU law, and amend how the UK courts interpret retained EU law. It will also still provide the Government with significant powers to change secondary retained EU law and secondary assimilated law – secondary legislation, typically a set of regulations, is that created under a ‘primary’ Act of Parliament and contains much of the practical detail of the Act.
The Government’s written statement explains that the Government plans to revoke approximately 600 EU laws through the Bill – an additional 500 will be revoked under the Financial Services and Markets Bill and the Procurement Bill – this is being done to ease the “regulatory burden on businesses and helping to spur economic growth”.
We will still have to wait and see whether any EU-related pensions law is on the Government’s new list of planned revocations, in particular, whether the effects of the Bauer and Hampshire judgments will be removed. There have been indications (column 169) from the Government that both may be within scope of revocation. Trustees should keep up to date with developments on this area and we will provide updates as the Bill progresses.
The Pensions Regulator (TPR) 10 May blog on continued economic uncertainty and refreshed sponsoring employer distress guidance
The Pensions Regulator’s latest blog covers the issues that flow from the continued economic uncertainty that the UK is experiencing – trustees and other stakeholders are expected to maintain vigilance so that they can address any adverse impact on sponsoring defined benefit (DB scheme employers. This includes monitoring the employer covenant and the difficulties sponsoring employers might encounter.
With this in mind, the Regulator has ‘refreshed’ its protecting schemes from sponsoring employer distress guidance that was first issued in Autumn 2020. The guidance has moved from a focus on the pandemic to one on the current economic challenges. Key points from this guidance include reference to:
- the need to have a fully documented integrated risk management approach and regular contact with the employer and other creditors as this will help identify issues and manage risks early on;
- delaying the implementation of scheme protections means other stakeholders may be better placed to control and take value from the employer;
- remaining vigilant to scams or unusual transfer activity; and
- referring to the Pension Protection Fund’s contingency planning guidance for employer insolvency where an employer is at risk of insolvency.
The blog emphasises that trustees need to engage with the Regulator and other ‘key stakeholders’ early on where the scheme’s sponsoring employer is in distress – the Regulator can provide relevant support to help a scheme obtain a ‘good outcome’ in distressed situations.
Action: Trustees of DB schemes whose sponsoring employer is distressed should ensure that they refer to the Regulator’s guidance and liaise with the Regulator and advisers as necessary to ensure that they take the most appropriate steps in the circumstances and that they can mitigate risk and protect the scheme as far as possible.
PPF 7800 Index Report shows scheme 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 April 2023 of the eligible 5,131 DB schemes shows that:
- the aggregate surplus of these schemes increased over the month to £378.6bn from a surplus of £359.3bn at the end of March 2023;
- total assets were £1,426.1bn and total liabilities were £1,047.5bn;
- the funding ratio increased from 133.2% at the end of March 2023 to 136.1% at the end of last month; and
- there were 691 schemes in deficit and 4,440 schemes in surplus.
TPO pensions complaint leaflet detailing differences between TPO and the FOS
The Pensions Ombudsman’s (TPO) 27 April 2023 pensions complaints leaflet details the differences between TPO and the Financial Ombudsman Service. It explains that both deal with pension complaints – the Financial Ombudsman Service for those relating to pensions advice received when taking out the pension, transferring between schemes or investing funds and the Pensions Ombudsman for complaints about administration and management of occupational or personal pension schemes. Administration of personal pension schemes can be dealt with by either body. The leaflet also provides useful guidance on how a complaint is referred to the other organisation in relevant cases and the approaches each take when looking at cases.
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