28 June 2018
Building a stronger Pensions Regulator – the Government fills in the gaps
On 26 June the DWP launched a consultation providing more detail on a key component of the new DB regime signalled in the March 2018 White Paper – a stronger Pensions Regulator. Its contents are of particular relevance to scheme sponsors, but there are also some messages for DB scheme trustees.
For further details see our News Alert.
Industry Group updates its pension scams code
The now renamed Pension Scams Industry Group has issued a refreshed Code of Good Practice designed to help trustees, pension scheme administrators and providers combat pension scams. It is applicable on a voluntary basis to all transfer requests processed from 22 June 2018.
The original Code was issued in March 2015 (see Pensions Bulletin 2015/13). Because of the changing nature of pension scams, further consequences of the introduction of pension freedoms and the clarification in law of the statutory right to transfer, the Industry Group has updated the Code. In particular, the new Code includes a focus on vulnerable customers, how schemes can talk to transferring members to collect better information, recommending schemes refer insistent members to TPAS for impartial guidance, making it easier for schemes to report suspected scams to Action Fraud, expanded template letters and stronger member discharges, case studies portraying real decisions made by real schemes, and greater clarity on member responsibility where decisions have been made contrary to due warning.
As before, this Code provides very useful material to assist in the necessary due diligence to guard against members being sucked into pension scams, whose threat continues to evolve. We welcome the publication of the latest edition of the Code and hope that it will further empower those on the frontline to do their best to dissuade members who look likely to be falling victim to a scam.
Government mainly says “not now” to MPs
This seems to be the theme underlying the Government’s response to the Work and Pensions Committee’s report on its inquiry into pension freedom and choice published in April (see Pensions Bulletin 2018/15).
- The Government is not convinced of the merits of default decumulation pathways which it believes could be inconsistent with the freedom and choice reforms. It will await the publication of the FCA’s final Retirement Outcomes Review in summer 2018 in order to consider fully its proposals on decumulation pathways, a charge cap on decumulation products and extending the role of Independent Governance Committees
- The Government is not yet minded to allow NEST to provide decumulation products other than lump sum payments, but will consider the FCA’s Retirement Outcomes Review with interest in this respect
- The June 2018 timetable proposed by the MPs for the FCA and Pensions Regulator to produce a template for best practice one-page pension passports as part of pre-retirement member communications is not realistic
Finally, the Government notes (and appears sympathetic to) the Committee’s views that the pension dashboard should be a single publicly hosted vehicle, covering state, DC and DB pensions and will set out its conclusions on these points when the DWP publishes its feasibility report.
We expect that at some point the Government will need to look seriously at developing a default for taking retirement income, but for now it is still hoping that something will turn up that resolves the issue.
The EU Withdrawal Act – change but no change for EU-inspired UK pension law
Following a turbulent passage through Parliament the European Union (Withdrawal) Act 2018 received Royal Assent on 26 June.
Despite the intense debate in recent days and weeks the main purpose of the Act is, in fact, to take a snapshot of all relevant EU law at the moment the UK leaves the EU and convert it to UK law with the assistance of wide-ranging “Henry VIII” powers to iron out incoherencies once we have departed. It also repeals the European Communities Act 1972 and specifies an exit day from the EU as (11 pm on) 29 March 2019, but subject to potential change by regulation.
The Act is silent on specific areas of law such as pensions, being essentially no more than a technical document necessary to ensure that the canon of UK law does not fall over on exit day. So for example, any UK implementation of EU Directives (such as the two European Pensions Directives) and any EU legislation which applies directly before exit day without the UK having to implement it (such as the GDPR) will be preserved.
In addition, the principle of the supremacy of EU law does not apply to any enactment or rule of law passed or made on or after exit day (but accordingly does to law passed or made before exit day).
It is only right that EU-inspired pensions law should (initially at least) be preserved in UK law at exit day because the alternative would be chaos. As to the future, whether UK Governments can undo the past and how they must have regard to future emanations from the EU very much depends on what Brexit deal is obtained – on which there is currently massive uncertainty.
Brussels takes the next step with pan-European personal pension schemes
The European Union’s plan to legislate for a “pan-European Personal Pension Product” (PEPP – see Pensions Bulletin 2017/28) continues with the European Council agreeing a negotiating stance in the form of the latest version of a draft regulation setting out how such a vehicle could operate across EU borders.
The hope is that the PEPP will make it easier for people in the EU to put money aside for old age in a way that complements existing state, occupational and personal pension systems.
The draft regulation is a fully-formed framework including provisions for the registration, governance, communication and investment of PEPPs, and a mechanism for streamlined switching between PEPPs for savers including across EU borders.
The PEPP will be a stand-alone product and so the regulation will not require personal pension products operating in domestic markets to adjust.
The next stage of the legislative process will take place in the European Parliament. It is possible that the regulation will become EU law while the UK is still an EU member state or during the transitional period that may run from the likely exit day next March. As the PEPP regulation will become applicable in member states two years after coming into force, we suspect that it will not need to be transposed into UK law.
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.