Pensions Bulletin 2017/39

Our viewpoint

Investment consulting – anti-trust investigation underway

The Financial Conduct Authority has confirmed its final decision to make a “Market Investigation Reference” to the Competition and Markets Authority, the UK’s anti-trust body.  This referral, the first one ever in the financial services field, triggers an investigation into investment consultancy and fiduciary management services provided primarily to trustees of occupational pension schemes.

This follows the FCA’s provisional view in June to reject a package of undertakings in lieu offered up by the three largest investment consultants/fiduciary managers (see Pensions Bulletin 2017/27).

The FCA has the power to make such a reference when it has reasonable grounds to suspect that any features of a financial services market prevent, restrict or distort competition.  In the case of investment consultancy and fiduciary management, the FCA considers those features are:

  • A weak demand side with pension trustees relying heavily on investment consultants, but having limited ability to assess the quality of their advice or compare services, with resulting low switching rates
  • Relatively high levels of concentration and relatively stable market shares, with the largest three firms together holding between 50-80% market share
  • Barriers to expansion restricting smaller, newer consultants from developing their business; and
  • Vertically integrated business models (where firms are offering both advisory and fiduciary management services) creating conflicts of interest

In reaching its decision the FCA has said that it has serious concerns about the market for investment consultancy services, noting in particular the concerns raised by respondents over the conflicts of interest point.

The CMA will now begin its work.  Should it find an adverse effect on competition, it must decide whether to take such action as it considers reasonable and practicable to “remedy, mitigate or prevent” the adverse effect along with any detrimental effects on customers (insofar as those effects have resulted from, or may be expected to result from, the adverse effect on competition).  There is no quoted timescale within which the CMA must report back.


We welcome this investigation, which may result in significant changes in the way in which investment consultants and their trustee clients operate in this market.  The CMA has draconian powers; ultimately they could order firms with vertically integrated business models to divest their fiduciary management arms.  It will be fascinating and important to see how the CMA conducts its investigation.

See LCP partner Matt Gibson’s blog for more commentary.

Pension scams – Finance Bill clauses published

HM Treasury and HMRC have released a number of draft clauses for the Finance Bill that will follow this year’s Autumn Budget, the date for which has now been confirmed as 22 November 2017.

One of these clauses concerns the promised clampdown on the registration of pension schemes in the light of the evolving challenge being presented by pension scams (see Pensions Bulletin 2017/35).

The Finance Act 2004 is to be amended to widen the circumstances in which HMRC may refuse to register a pension scheme to include:

  • Where the scheme is a Master Trust and has not been authorised by the Pensions Regulator; or
  • Where a sponsoring employer of an occupational pension scheme is a dormant company (defined as not having a significant accounting transaction during any month in the year ending on the date when HMRC decides to refuse to register the scheme)

Similar changes are also to be made to the circumstances when HMRC can de-register a pension scheme.

The changes in relation to dormant companies will come into force on 6 April 2018.  Those in relation to Master Trusts will need to await the coming into force of the authorisation aspects of Master Trust Schemes as set out in the Pension Schemes Act 2017.


These clauses only seem to go part of the way to tackling the issues on which the Government decided to take action last month as there is silence on schemes being registered without employer consent.  However, it is possible that legislation is not required for this aspect.

Pensions Regulator launches its 21st Century Trusteeship campaign

Following on from the concern expressed last week about aspects of DB and DC governance (see Pensions Bulletin 2017/38), the Pensions Regulator has now launched a new campaign to drive up governance standards across workplace pension schemes.

Targeted emails will direct trustees, scheme managers, employers and advisers to a new page on the Regulator’s website where they will find specific and relevant content that sets out clear standards that the Regulator expects schemes to meet.

They will also be signposted to supporting resources, including guidance within the Regulator’s codes of practice and practical tools to help trustees raise the standards of governance in their schemes.

The campaign will focus initially on emphasising the fundamental importance of good governance.  As it progresses in the coming months, extra content will be added to the website, covering key governance themes.  The Regulator says that as it is now communicating its expectations more clearly to trustees, those who fail to respond to its more directive approach may face further regulatory action.


Given the extensive community that it serves and that it is presently constituted very much as a reactive Regulator, it would seem that the success of this campaign rests very much on the ability of the Regulator to craft appropriate messages, send them to the right people, linking them into content which is relevant and digestible.  We wish the Regulator much luck in this new venture.

Nortel – now the Regulator tells the story

As the long running saga that is the Nortel anti-avoidance case comes to a conclusion, the Pensions Regulator has published its regulatory intervention report on the use of its powers in this case – which in particular covers the effectiveness of seeking to apply financial support directions to non-UK companies.

The Regulator started its anti-avoidance investigation in January 2009 following the insolvency of the Nortel group.  Although a global settlement agreement was reached in June 2016, with the paperwork signed by all parties in October 2016, it only became legally effective on 8 May 2017.  Since then the final company voluntary arrangements were approved, the “lockbox” opened and the Nortel Networks UK Pension Plan has received its first payment.  It is expected that the final amounts for the Plan, all adding up to in excess of £1 billion, will be paid by the end of 2018, which should enable the members’ benefits to be bought out at above PPF levels of compensation.  In the meantime the Plan remains in PPF assessment.


This is clearly a great result for the Pensions Regulator, but the timescale over which it has had to operate, including the some 2½ years since the UK pension claimants won their case (see Pensions Bulletin 2015/22), has been quite extraordinary.

DWP consults on details of service-related FAS cap

A consultation on some of the details of the new service-related cap on assistance from the Financial Assistance Scheme has been launched by the DWP.  This follows the announcement this time last year that this cap, which is equivalent to that now delivered for the Pension Protection Fund, would go ahead (see Pensions Bulletin 2016/38).

The purpose of the consultation is to establish whether the draft regulations achieve the policy intent of creating an increased FAS cap for long service, and whether the proposed long service cap operates correctly in the particular circumstances covered.

As with the PPF cap, the FAS cap has the following features:

  • The current cap (£34,229 in 2017/18) will be increased by 3% for each full year of pensionable service above 20 years, subject to a new maximum of double the standard cap
  • The increase is not backdated and takes effect from the member’s first pay day on or after the regulations come into force; and
  • As with the standard cap, it is applied when a member first becomes entitled to receive payments from the FAS

Other aspects include that the long service cap will not apply when calculating initial payments and interim ill-health payments, there will be no revisiting of lump sums already taken in commutation of part of FAS assistance and the FAS manager will have the power to deem the length of pensionable service in certain situations.

Consultation closes on 25 October 2017 with the intention that the regulations will be in force by 6 April 2018.


The proposals appear to address the issues necessary to ensure that the cap can be successfully implemented, although the devil will be in the detail.  Those with long service in their failed scheme and who are currently in receipt of capped assistance will be looking forward to a much needed boost next April.

ACA publishes first report on its 2017 pension trends survey

The Association of Consulting Actuaries has released the first findings from its pension trends survey conducted over the summer amongst employers.

The findings include the following:

  • 53% of those with DB schemes say the costs associated with their schemes are having a negative impact on pay increases, with 80% saying their cost was also having a negative impact on inter-generational equity
  • 84% of those with DB schemes say the law should be changed so that such schemes can reduce pension increases if continuing to provide increases at the level of scheme rules will severely and adversely affect the employer, with the largest number favouring this being subject to an agreement with trustees
  • 79% of those with DB schemes support increased punishments for those caught mismanaging schemes and 68% support new criminal offences for directors who “deliberately and recklessly” put at risk the ability of a scheme to meet its obligations; and
  • 77% of employers favour retaining the current pension tax relief structure, but with more help targeted on lower incomes

Further findings are due be published in October with a final report in November.


This first release contains some interesting snippets.  We will have to wait for this winter’s White Paper and November’s Budget to see whether the Government responds to some of the concerns being expressed.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.

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