Pensions Bulletin 2017/52

Our viewpoint

DWP hails further success in reducing fees and charges in legacy DC schemes

The DWP has published an update on the progress made since this time last year on reducing costs and charges in certain legacy DC schemes (see Pensions Bulletin 2016/50).

The details are contained within the FCA’s linked announcement where it can be seen that in the last twelve months an estimated £4.9bn of assets under management have had their costs and charges reduced to 1% or less.  This leaves just £0.9bn of the original £25.8bn flagged up in a report published by an Independent Project Board in December 2014 (see Pensions Bulletin 2014/52) on which the Government considers that excessive amounts are potentially being charged by providers.

The FCA has reminded all providers that it expects them to continue to ensure that customers are not exposed to charges that are poor value for money and to engage with their Independent Governance Committees, trustees and members to achieve this.  The FCA has also reminded the providers and schemes still considered to be charging excessive amounts that they must take the necessary actions in 2018 and consider adopting temporary measures until they do so.

For the DWP’s part, there is a threat to legislate, if necessary, if the remaining high costs and charges are not eliminated by the end of 2018.


Despite this threat, it does seem (from the little that is in the public domain) that there will be a resolution in relation to the remaining funds that is acceptable to the Government.  Should it be necessary to legislate, it is not clear how straightforward this will be.

Spring Statement date confirmed along with new tax law-making process

HM Treasury has confirmed that the new “Spring Statement” will be held on 13 March 2018.  To accompany this, the Treasury has also issued a policy paper that explains the new Budget timetable and the tax policy making process.  The paper highlights the following:

  • The Chancellor will not make significant tax or spending announcements at the Spring Statement, unless the economic circumstances require it
  • A single autumn Budget will mean tax changes are announced well in advance of the start of the tax year in which they will take effect
  • There will be more time available to scrutinise draft tax legislation ahead of its introduction and commencement; and
  • There will be new opportunities for the Government to consult with stakeholders at earlier stages of policymaking, including by launching consultations at the Spring Statement

In many cases the intention is that policies will be announced at the autumn Budget and consulted on in winter and over the spring.  Draft legislation will then be published in July (to be known as “L Day”) for technical consultation ahead of the Finance Bill being introduced the following autumn.  Under this cycle most policies will be announced at least 16 months before they come into effect at the start of the next tax year.

There will be exceptions to this approach – such as where measures are needed to address clear avoidance or evasion where consultation would put revenue at risk, or other changes where consulting too far in advance could lead to a large scale distortion in behaviour that outweighs the benefit it would bring.  Tax measures required as a consequence of leaving the EU are also likely to merit exceptional treatment.


This all looks a most sensible approach to policymaking, but it is unlikely to be the end of the Budget Day surprise.  Had this approach to policymaking been in place under the previous Chancellor, his “freedom and choice” policy, which took everyone by surprise in March 2014, would have surprised us all in say November 2013 and so given everyone a few more months to prepare for April 2015.

MPs pile pressure on Government to accelerate action against pension scams

On the back of evidence received on whether the previous Chancellor’s freedom and choice policy has encouraged “unscrupulous scam artists” (see Pensions Bulletin 2017/40) the Work and Pensions Committee has published its first report in this area entitled “Protecting Pensions against scams: priorities for the Financial Guidance and Claims Bill”.

The report looks at two areas – pensions cold calling and default guidance – and its conclusions and recommendations are summarised below:

  • Although welcoming the Government’s commitment to ban pensions cold calling, the MPs, in common with the Lords, are very concerned about the Government’s lack of urgency. Whilst welcoming the non-Government sponsored clause to ban pensions cold calling that is now set out in the Financial Guidance and Claims Bill (see Pensions Bulletin 2017/50), the MPs believe it to be flawed as it links the introduction of the ban to the establishment of the new financial guidance body, thus potentially delaying it until 2020.  The MPs propose instead that the clause is amended to require the ban to be in place by June 2018 with the detail and scope set by regulations
  • The MPs also recommend that the clause in the Bill that nudges members to access Pensions Wise guidance prior to making decisions relating to their pensions at retirement or on transfer are strengthened “to ensure that an individual receives or expressly refuses guidance before being granted access to a pension pot”. The MPs also suggest that what constitutes a choice not to receive guidance should be clearly set out in FCA rules, along with details of cases that would be exempt

The report concludes with suggested amendments to the Bill.

In a related development, the Committee has been taking evidence this week in relation to concerns it has that decisions that British Steel Pension Scheme members are having to take as part of the restructuring of the pension scheme, are resulting in a “honeypot for scammers”.


The significance of the MPs’ report is in the political pressure it exerts on the Government, which has been seen by many not to be acting fast enough in relation to pension scams for many years.  These amendments may well have their day in Parliament at Committee stage in the New Year, and it could be that the Government will be forced to accelerate its timetable in relation to cold calling.

The far stronger nudge to use Pension Wise/TPAS that the MPs are proposing also causes potential headaches for the Government, not least of which is the funding shortfall that will inevitably arise if far more individuals take up the offer to take face to face or telephone guidance.

FRC sketches out future direction of the UK Stewardship Code

The Financial Reporting Council is consulting on various high-level questions about the future direction of the UK Stewardship Code, as part of a consultation on a revised version of its sister, the UK Corporate Governance Code.  The Stewardship Code, which was last reviewed in 2012, seeks to enhance the quality of engagement between investors and companies to improve long-term risk-adjusted returns to shareholders.  Many investment managers and some pension schemes are signatories to the Code.

The consultation questions in relation to the Stewardship Code include:

  • Would separate codes or enhanced separate guidance for different categories of the investment chain help drive best practice
  • Should the Stewardship Code focus on best practice expectations using a more traditional “comply or explain” format
  • How could an investor’s role in building a company’s long-term success be further encouraged through the Stewardship Code
  • Should the Stewardship Code more explicitly refer to ESG factors and broader social impact
  • Would it be appropriate for the Stewardship Code to support disclosure of the approach to directed voting in pooled funds

The FRC has requested responses to these as well as those on the Corporate Governance Code by 28 February 2018.  It expects to consult on specific changes to the Stewardship Code in mid-2018, once it has finalised the revised Corporate Governance Code.

The new Corporate Governance Code itself is expected to be published in final form by early summer 2018, to apply to accounting periods beginning on or after 1 January 2019.


The wide-ranging nature of the consultation questions on the Stewardship Code suggests that the FRC is considering major changes.  This represents the next stage in its efforts to improve investors’ stewardship practices.  We view this positively, especially the FRC’s willingness to explore how it can make the Code more relevant to pension scheme trustees who delegate stewardship to their investment managers.

The changes being proposed to the Corporate Governance Code are also substantial, but they appear to preserve the current approach in relation to the handling of directors’ pension provision.

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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