In this week’s update we look at the Regulator’s Corporate Plan, draft legislation permitting a Government loan to the PPF, the DWP’s ‘simpler annual benefit statements’ consultation, the joint call for input on the ‘consumer pensions journey, the PLSA’s response to the WPC pension freedoms inquiry and a round-up on data protection.
Regulator's Corporate Plan 2021-24
The Pensions Regulator (the Regulator) has published its Corporate Plan 2021-24 setting out how it will deliver against the five strategic priorities which were set out in its 15-year Corporate Strategy over the next three years. Implementing the Pension Schemes Act 2021 (the Act), combatting pension scams and developing a framework for measuring value for money are three of those priorities. The Plan also recognises the ongoing effect of the pandemic noting that it has impacted 'every aspect' of the Regulator's work.
Timelines in the Plan note that:
- The notifiable events changes under the Act will come into effect in 2022 (later than the expected October 2021 implementation date for the other enhanced Regulator powers);
- Climate change guidance on the Regulator's expectations on the new TCFD reporting requirements will be published in 2021/22;
- Work will continue on the interim superfund regime during the remainder of this year with the regulatory framework expected to come into effect in 2022/23;
- The revised DB funding code of practice will come into force by December 2022.
The key priorities of the Regulator will also be a focal point for trustees over the coming months.
Legislation to allow government loan to the PPF
The Government has introduced the Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill to the House of Commons. This Bill will permit loans to be made by the Government to the Pension Protection Fund (the PPF) to increase the amount available to the Fraud Compensation Fund (the FCF). This follows the increase in compensation outlay arising from the recent High Court case (the Board of the PPF v Dalriada [2020]) in which it was decided that the FCF can, in certain circumstances, compensate pension scam victims.
The compensation payments arising from the case are estimated to be in the region of £350m. However, as the explanatory notes to the Bill explain, at the time of the judgment, the FCF had expected unfunded liabilities of between £200m to £250m even with future levy income and only £26.2m of assets. The loan is expected to be between £200-£250m. The repayments will be made from the income received from the FCF levy which the PPF recently announced would be increasing for 2021/22 to the maximum 75p per member (master trusts at a rate of 30p per member) .
The Bill received its first reading on 12 May 2021. As at the time of writing, the date for the second reading had not been announced.
DWP consultation on 'simpler annual benefit statements'
The DWP has published a consultation on simpler annual benefits including draft regulations and draft statutory guidance.
The new requirements will apply to defined contribution pension schemes used for automatic enrolment (not hybrid schemes) and are intended to come into effect on 6 April 2022. The aim is to improve member engagement by ensuring that core information is both clear and easy to understand.
The new statement will allow a member to see:
- How much money is in the arrangement and what has been saved in the statement year;
- How much money they might have at retirement; and
- What could be done to increase the amount available at retirement.
The idea is that the statement will be no longer than a double-sided sheet of A4 paper and the guidance includes a draft illustrative template. The consultation closes on 29 June 2021.
Regulator and FCA call for input on improving the consumer pensions journey
The Regulator and the Financial Conduct Authority (the FCA) have launched a call for input from the pensions industry about how decisions are made by consumers at 'key points' during their working life.
Since the introduction of automatic enrolment in 2012, there has been a 'seismic shift' towards defined contribution (DC) and there are now 15 times as many savers building up benefits in DC arrangements than in defined benefit schemes.
This means many more individuals are bearing the risk of retirement planning with engagement issues risking sub-optimal decisions being made and increasing vulnerability to pension scams.
The Regulator and the FCA wish to discover ways to improve the journey to and at retirement and hope that the call for input will provide insights which will assist in policy making. The call for input closes on 30 June 2021.
PLSA calls for legislation on pension freedoms and saver support
In its submission to the Work and Pensions Select Committee inquiry into the pension freedoms, the PLSA has called for legislation to provide new product, communication and governance standards to support members at retirement because it believes that the action taken so far by the 'industry, Government and regulators' has been insufficient to address decumulation option issues. (Decumulation is the process whereby a member's savings are converted into a retirement income.)
The standards would involve schemes providing useful guidance and signposting to suitable products building on existing regulatory approaches and guidance services.
The WPC inquiry is currently in the second stage of the three-strand inquiry into the impact of the pension freedoms and the protection of savers. The PLSA's submission responds to the inquiry's call for evidence for the second stage which is considering "how savers are prepared and protected to move from saving for retirement to using their pension savings".
Data protection update – data sharing code of practice & EC assessment of adequacy of UK's data protection regime
Data sharing code of practice
The Information Commissioner's Office (the ICO) has confirmed that the new data sharing code of practice (see our earlier Insight Update) has now been laid before Parliament and will, if there are no objections, come into force after 40 sitting days,.
The code provides practical guidance on how to share personal data complying with the fairness, lawfulness, transparency and accountability requirements under the UK General Data Protection Regulation and the Data Protection Act 2018.
EC assessment of adequacy of UK's data protection regime
The European Parliament's Civil Liberties Committee (the Committee) has confirmed that it has called for the European Commission to amend the draft adequacy decisions for the transfer of personal data from the EU to the UK (one under the General Data Protection Regulation and the other under the Law Enforcement Directive).
Although the UK data protection legal framework is similar to that of the EU, both the European Data Protection Board and the Committee have concerns about alignment with EU court rulings, implementation and exemptions.
The Committee 'urges' the European Commission and the UK authorities to address the concerns as without an 'action plan', the adequacy decisions may not be adopted. This would impact the continued free flow of personal data from the EU to the UK when the temporary 'bridging' mechanism agreed as part of the withdrawal arrangements under the EU-UK Trade and Co-operation Agreement ends in June 2021. The ICO has previously recommended that organisations implement alternative transfer mechanisms to as a precaution should agreement not be reached before the bridging mechanism ends.