In this edition of our Insight, we cover all the latest pensions legal, regulatory and industry developments including the appointment of a new Pensions Ombudsman, the new Data Protection Bill, the draft Finance Bill and reintroduction of the auto-enrolment private members' Bill along with an update on the new master trust ERI regulations and a pensions dashboard round-up.
The Pensions Ombudsman
Dominic Harris confirmed as the New Pensions Ombudsman & PPF Ombudsman
On 18 July 2022, the Work and Pensions Committee approved the appointment of Dominic Harris as the new Pensions Ombudsman and Pension Protection Fund Ombudsman. This follows the DWP's 11 July 2022 announcement (see our Insight) that Mr Harris was the preferred candidate and the Work and Pensions Committee 13 July 2022 pre-appointment hearing.
Mr Harris will take over from Anthony Arter who has been the Pensions Ombudsman (and PPF Ombudsman) since May 2015 and whose current term of office will end on 31 July 2022.
Factsheet on approach to McCloud and Sargeant age discrimination complaints
The Pensions Ombudsman has published a new factsheet on its approach to age discrimination complaints relating to the McCloud and Sargeant judgments under which it was held that the transitional arrangements introduced by the Government to mitigate the effect that 2015 public sector pension scheme adjustments might have on older members amounted to unlawful age discrimination.
The Government is remedying the discrimination for the period between April 2015 and April 2022 (see our Insight) when new arrangements came into force but there are some members where there might be immediate detriment before the remedy is implemented (for example, ill health retirees and dependants of members who have died). Schemes will need an approach on dealing with these cases.
Although many members will be happy to wait until the remedy is implemented, some may wish to complain. The Ombudsman's 'general starting position' is that it will not investigate such complaints but will consider each case and may investigate in certain circumstances, for example, where there are allegations of maladministration or a complaint of severe financial hardship and/or other serious injustice in respect of which the scheme is not implementing interim arrangements to deal with the matter within a reasonable period.
Data Protection and Digital Information Bill – first reading in House of Commons
The Data Protection and Digital Information Bill was introduced into the Houses of Common and had its first reading on 18 July 2022. The Bill is designed to amend the UK GDPR and the Data Protection Act 2018 to 'update and simplify' it so that burdens on organisations are reduced. It will also provide more flexibility as to the way in which specific parts of the legislation may be complied with.
The explanatory notes to the Bill (which neither form part of the Bill nor have Parliament's endorsement) explain that the proposed changes include the following:
- Reform of the data protection regulator, the Information Commissioner;
- Clarification in respect of international transfers and cross-border flows of personal data;
- Setting up a framework for providing digital verification services to secure reliability and to allow digital identities to "be used with the same confidence as paper documents";
- Provisions on smart data schemes which can be used to securely share customer data; and
- Provisions which will facilitate the "flow and use of personal data for law enforcement and national security purposes".
CMA regulations published
The Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2022 that will implement the relevant CMA Order requirements into pensions legislation were published on 19 July 2022. They are due to come into force on 1 October 2022 (see our Insight for details of the regulations, and the relevant DWP consultation and response).
Draft Finance Bill 2023
On 20 July 2022, HMRC and HM Treasury published draft legislation which will form part of the Finance Bill 2023 along with tax information and impact notes and explanatory notes. There are three pensions-related matters:
- pensions relief for net pay low earner measures under which HMRC will make top-up payments directly to low-earning individuals saving in a pension scheme using a net pay arrangement to remove an inequity between this group and equivalent pension savers that use relief-at-source schemes (see our Autumn budget 2021 quick read for further background information);
- clarifying that periodic income payments to pensioners under a collective money purchase pension scheme that is being wound up will be treated as authorised payments.; and
- tax provisions in relation to the Dormant Assets Scheme that mean where an individual identifies a pension that has been transferred into the Dormant Assets Scheme, any payments in respect of those pension funds will be treated for tax purposes as if they were the original pension asset. This follows the recent expansion of the Dormant Assets Scheme under the Dormant Assets Act 2022 to include assets from the pensions, insurance, investment and wealth management and securities sectors. Assets transferred are subject to the original asset owner having the right to reclaim relevant amounts that have been moved over.
The consultation on the draft measures closes on 14 September 2022.
Auto-enrolment private members' Bill brought back into Parliament
Also on 20 July 2022, Richard Holden MP's private members' Bill which seeks to extend automatic enrolment to jobholders aged 18 and over (from age 22) and remove the lower qualifying earnings threshold from contribution calculations, was brought back to the House of Commons when it received its first reading. As our March Insight explained, the Bill was put on hold earlier this year. During debate, Mr Holden confirmed that the Bill has received support from the Pensions Minister but whether it will receive formal Government support is still not confirmed. The publication of the Bill and its second reading is due to take place on 28 October 2022.
DWP response on master trust ERI regulations
The DWP has published its response to the March 2022 combined consultation which covered proposals in respect of draft ERI regulations which would remove certain employer-related investment (ERI) restrictions relating to master trust schemes which have 500 or more active participating employers (see our Insight). This is on the basis that since the ERI provisions were first introduced, the pensions market has evolved, and the current provisions do not reflect the 'lower risk relationship' between the scheme and employers in a master trust arrangement.
The ERI requirements mean that for multi-employer schemes, ERI should not exceed 5% of the current market value of the scheme's assets in one particular employer and in any event must not exceed 20% of the current market value of scheme assets.
To recap, the regulations will remove the ERI restrictions in respect of the participating employers – they will instead apply to the scheme funder and scheme strategist (or associated and connected persons).
Most of the 28 respondents supported the proposals and, subject to a couple of minor changes, the regulations will go ahead as proposed. A final version will be published in due course along with the usual impact assessment.
Pensions dashboards round-up
Pensions dashboards private members' bill
The Pensions Dashboards (Prohibition of Indemnification) Bill received its second reading in the House of Commons on 15 July 2022.
This Bill is a private members' Bill which will expand the prohibition in section 256 of the Pensions Act 2004 that prevents scheme assets in occupational and personal pension schemes from being used to reimburse trustees for certain fines and civil penalties to include civil penalties in respect of breaches of the pensions dashboards legislation.
The Bill has received Government support and so is likely to make it into the statute books.
PDP publishes pensions dashboards standards
The Pensions Dashboards Programme has published a consultation on various standards and guidance notes on the requirements that will apply to pension and qualifying pensions dashboards service providers when the pensions dashboards come into effect. In essence, the standards provide the 'technical and operational detail' behind the legislation.
(The Pensions Dashboards Programme was established by MaPS in 2019 and is responsible for setting up the digital architecture and governance framework (the ecosystem) under which dashboards will operate.)
Updated Pensions Regulator guidance on dashboards
The Pensions Regulator has updated its initial dashboards guidance to take account of the DWP's response to its consultation on the draft Pensions Dashboards Regulations (see our Insight).
The update refers to the two-month staging deadline delay for the first two cohorts and to the requirement for a Data Protection Impact Assessment where data is matched, combined or compared from multiple sources (this will need to be either produced or updated where a scheme already has one).
Regulator's CDC code of practice finalised
The Pensions Regulator's new collective defined contribution code of practice has been finalised following it having laid in Parliament for 40 days. It will come into force, as planned, on 1 August 2022. This means that applications for authorisation can be made as from this date although, at present, the only CDC scheme on the horizon is the Royal Mail Collective Pension Plan.
The Occupational Pension Schemes (Money Purchase Schemes) Regulations 2022 which will implement the new authorisation and supervisory framework for CDC schemes will also come into force on 1 August 2022.
Possible stronger nudge exemption for AVCs and small hybrid DC pots
In a joint 11 July 2022 letter to the Work & Pensions Committee, various pension schemes representing approximately £217bn of scheme assets have noted that the DWP will consider whether an exemption from the stronger nudge requirements should be brought in for AVCs and small hybrid DC pots following concerns expressed regarding the application of the requirements to these types of benefit including that members may end up not taking decisions that are in their best interests.