Pensions Bulletin 2021/08
Our viewpoint
25 February 2021
- Dashboard looks for confirmation of its digital identity approach from data providers
- DWP to ask schemes whether they sufficiently address social risk factors in their investment approach
- PPF publishes restructuring documents
- MPs to examine access to pension savings
- Has Uber reached an employment destination?
Dashboard looks for confirmation of its digital identity approach from data providers
The Pensions Dashboards Programme (PDP) has issued a ‘call for input’ on digital identity to those who will be making data available to the dashboard – such as trustees, schemes and pension providers.
This follows a recent request by the PDP for information from key participants in the identity market. The call for input sets out the PDP’s intended approach to the establishment of an individual’s identity “to a standard acceptable to the ecosystem as a whole” before data is made available to that individual through any dashboard. The PDP intends to ensure that the identity solution is based on Good Practice Guide 45 and authentication on Good Practice Guide 44 – both written by the Government Digital Service and published by the Cabinet Office.
As regards an individual’s identity the intention is that the user will have to consent to an identity provider validating their identity and confirming the following information – first name, family name, date of birth and address. They may also have to provide the following ‘user asserted attributes’ which may or may not be validated by the identity provider. These are national insurance number, address history, email address, telephone number and previous names.
The identity provider will validate some of the information supplied against five criteria in order to build up an overall level of confidence that the individual is who they say they are. The PDP proposes a ‘medium level’ of confidence to be required before the identity service provides verified attributes to the pension finder service, alongside user asserted attributes.
On user authentication when an individual logs on the PDP proposes a ‘medium level’ approach which incorporates a minimum of 2 factor authentication with attendant security of credential lifecycle and transaction monitoring.
The PDP says that the identity industry was broadly in agreement with both these approaches.
The call for input closes on 19 March 2021.
Comment
This is an important consultation because as those providing data to the dashboard retain responsibility for incorrect disclosure of data, they need to have confidence that what the PDP is proposing on establishing an individual’s identity makes sense. The PDP on the other hand can’t propose a system that is too rigorous given the need to reach a high proportion of holders of UK pensions. However, if data breaches occur because of a problem with the central identity service, surely the buck stops with the PDP?
DWP to ask schemes whether they sufficiently address social risk factors in their investment approach
The Government intends to seek views on whether occupational pension schemes’ policies and practices on social risk factors are sufficiently robust and what the Government could do to ensure that trustees are able to meet their legal obligations in this respect. This interesting snippet is contained in written answers given to two Parliamentary written questions posed by Lord Alton. The first was whether the investment strategies of pension funds and other institutional investors comply with the UN Guiding Principles on Business and Human Rights; the second was whether they take into account crimes against humanity and genocide as social risk factors.
The background to this is that since 1 October 2019 most occupational pension schemes have been required to set out in their Statement of Investment Principles their policies in relation to financially material considerations (including those relating to environmental, social and governance (ESG) considerations, such as climate change), over the appropriate time horizon of the investments including how those considerations are taken into account in the selection, retention and realisation of investments.
The DWP states it has already written to 40 large pension schemes to understand their current practices.
Comment
The Government is apparently getting concerned that, whilst the “E” in ESG is becoming mainstream for pension schemes, the “S” is being overlooked. It is possible that the Government could take action to correct this, perhaps by asking the Pensions Regulator to expand its investment guidance.
PPF publishes restructuring documents
The Pension Protection Fund has issued a number of precedent materials relevant to corporate restructurings – particularly where there is a distressed employer and a Relevant Apportionment Arrangement (RAA) will allow that employer to be separated from its pension liability in return for the trustees or the PPF taking an equity stake in the new employer.
The materials, intended for use by legal professionals, are:
- A precedent PPF Shareholders’ Agreement and Articles of Association, to be used in conjunction with each other. The Shareholders’ Agreement outlines the terms upon which, under various scenarios, the PPF may be prepared to take an equity stake as part of the restructuring. This is done on the assumption that the Pensions Regulator has given clearance and a qualifying insolvency will occur in relation to every sponsoring employer, triggering an assessment period that gives the PPF the power to exercise any of the rights or powers of the trustees. Provisions include a list of actions that the company cannot take without the trustees’/PPF’s written permission (assuming they hold over 50% of ordinary shares), the ability for the PPF to charge the company for the costs incurred giving/refusing such permission and the right for the PPF to access information. The trustees and the PPF have the power to appoint a director of the company and are also to be informed of any future approach to buy equity in the company
- A precedent Loan Note Instrument and Guarantee and Debenture for where the PPF may be prepared to take one or more Loan Notes or security over the assets of a company as part of a package of measures in a restructuring. However, the PPF’s strong preference is to receive cash. These are accompanied by Guidelines for intercreditor arrangements in RAA transactions
Comment
The PPF’s modus operandi on corporate restructuring has been known for some while, but this is the first time we have seen a suite of standard documents to support this. They will be helpful for the advisers to distressed sponsors and the trustees of their pension schemes to appreciate what the PPF will likely be willing to accept when it gets down to the detail.
MPs to examine access to pension savings
The Work and Pensions Committee has launched an inquiry investigating access to pension savings as part of its broad inquiry into the impact of pension freedoms. This inquiry will examine the options open to people when they come to access their pensions, as well as what advice and guidance is available to support decisions. The call for evidence asks several questions which cover this topic and the deadline for written evidence is 14 April 2021, although evidence received after that date may still be used.
This inquiry is the second of three inquiries that the Committee intends to hold. The first about pension scams was launched last summer (see Pensions Bulletin 2020/31) and is expected to report soon. The third and final inquiry will look at saving for later life and will start later in 2021.
Comment
The Committee’s first inquiry about pension scams was clearly in the public interest and amongst other things received some harrowing testimony from pension savers. This new inquiry may well expose the limitations of guidance and information in assisting pension savers take access decisions.
Has Uber reached an employment destination?
Uber has now exhausted the available legal avenues in relation to its contention that its drivers are not “workers”. The case, which started in the Employment Tribunal in 2016 (see Pensions Bulletin 2016/44) has now concluded with a Supreme Court ruling on 19 February 2021 that its drivers are indeed “workers”.
Comment
As we remarked over four years ago, this means that its drivers are entitled to the national living wage and holiday pay. It is not clear whether such “workers” are also to be treated as “jobholders” within the meaning of auto-enrolment law and so potentially need to be enrolled into a pension scheme. Nevertheless, the definition of “worker” in the Employment Rights Act 1996 on which this case rested is very similar to that in the Pensions Act 2008. It is also not yet clear if this ruling will have a wider impact on the “gig” economy but if it does then obviously the impact will spread far beyond Uber.