Pensions Bulletin 2021/15
Our viewpoint
8 April 2021
- Pensions Regulator publishes its climate change strategy
- Pension scams code updated
- Fraud compensation levy to be raised
- Pensions Ombudsman promotes its early resolution service
- Regulator warns that cross-border schemes may not be valid auto-enrolment vehicles anymore
- PPF business plan for 2021/22 published
- GMP inequalities in public sector schemes – Treasury Direction made
- “Back to 60” appeal turned away by Supreme Court
Pensions Regulator publishes its climate change strategy
The Pensions Regulator has published a short document setting out its strategic response to, and how it thinks it can help trustees meet the challenges from climate change.
The Regulator’s climate change strategy document sets out the context in which it has been produced, some specific aims and objectives for the Regulator over the course of the next three years, the approach that the Regulator intends to take with occupational pension schemes on climate-related risks, how the Regulator will participate in the ongoing debates on climate change, and what the Regulator will do as a business in its own right to improve its behaviour in relation to climate change.
Throughout the document there are references to actions that the Regulator will take and resources that it will provide that are too numerous for all to be mentioned. But some key items are as follows:
- The publication of new guidance later this year, following industry engagement, outlining what the Regulator will be looking for from those schemes required to provide TCFD (Task Force on Climate-related Financial Disclosures) reports in line with the requirements of the Pension Schemes Act 2021 and regulations yet to be settled (see Pensions Bulletin 2021/04)
- Working with the DWP to share best practice TCFD reports, although not until 2023
- The review of existing Regulator guidance, filling in gaps where regulation has moved on
- Carrying out a thematic review on scheme resilience to climate-related scenarios – probably using published TCFD reports
- Reviewing a selection of implementation statements, publishing its findings
Comment
This is a useful document as it brings together the many climate change strands on which the Regulator is working and makes clear to pension scheme trustees the importance that the Regulator is placing on this topic. Trustees should note the emphasis the Regulator is placing on stewardship and, for DB schemes, the need to ensure that climate change risks are considered within covenant, actuarial and investment IRM processes.
Pension scams code updated
The Code of Good Practice on combatting pension scams, produced by the Pension Scams Industry Group to assist trustees, scheme administrators and providers, has been updated, with the new version 2.2 effective from 1 April 2021.
The lengthy Code is now divided into five sections of which three are most noteworthy:
- Practitioner Guide – setting out the due diligence steps that pension schemes should take when assessing the pension scam risk of a transfer request
- Resource Pack – containing materials firms can use to undertake the due diligence steps
- Technical Guide – detailing the Code’s rationale, including legislative and regulatory requirements
Changes to the content since the previous edition published in June 2019 (see Pensions Bulletin 2019/23) mainly reflect regulatory, legal and other developments over the period, although there are some changes to processes and materials.
Now running to over 130 pages, the Code remains voluntary although there has been talk of it becoming mandatory.
Comment
Not so much a Code, but rather a comprehensive resource for pension schemes to reference and build into their processes as necessary in order to keep up to date with best practice on the ever-evolving threat that is pension scams. For the authors a labour of love on which they will shortly need to return as regulations to come, as a result of the Pension Schemes Act 2021, constrain the statutory right to transfer.
Fraud compensation levy to be raised
The Pension Protection Fund has announced that the 2021/22 levy for the Fraud Compensation Fund will be 75p per member of every occupational pension scheme (DB or DC), but with authorised master trusts being charged 30p per member. These figures are the maximum permitted.
Proceeds from this levy will be added to the £21.5m already held within the Fund, in order to be applied to compensate victims of certain pension scams. This follows a High Court ruling last November (see Pensions Bulletin 2020/47) that paved the way for such claims to be considered. The PPF has received claims amounting to over £40m and is expecting to receive more as a result of the ruling.
Comment
We are not surprised at this announcement. Over the coming months we hope to hear more from the PPF about the scale of the issue and the likely trajectory of a levy that for much of the Fraud Compensation Fund’s existence did not need to be raised.
Pensions Ombudsman promotes its early resolution service
The Pensions Ombudsman has published a useful factsheet about its early resolution service. This informal dispute resolution service has been provided through the Pensions Ombudsman’s office since March 2018 as a result of the transfer of the Pensions Advisory Service’s dispute resolution function.
The factsheet explains how the service operates (which is outside the Ombudsman’s formal adjudication route) and what can happen if the individual concerned remains unsatisfied with the outcome.
Comment
This service has been instrumental in enabling the formal and inevitably slower adjudication route to be used more sparingly. Many disputes can be resolved informally, so it is good to see the Ombudsman promoting this service.
Regulator warns that cross-border schemes may not be valid auto-enrolment vehicles anymore
One of the Pensions Regulator’s guidance documents on cross-border schemes, updated in February (see Pensions Bulletin 2021/07) has now had a section on using non-UK schemes as auto-enrolment vehicles recast.
The February guidance said that if a cross-border scheme met the non-UK qualifying criteria and the additional requirements to be an automatic enrolment scheme during the Brexit transition period, then the scheme could continue to be used as an auto-enrolment vehicle from 1 January 2021. The March version by contrast says that the rules for using EU/EEA based schemes to meet auto-enrolment duties changed on 1 January 2021 and it may no longer be possible to use such schemes in this way.
Those in this position are asked to check whether they can still use an EU/EEA scheme for auto-enrolment purposes, taking legal advice where appropriate.
Comment
This is all very confusing, but hopefully the few companies that have used cross-border schemes as auto-enrolment vehicles will have taken legal advice at some point in the transition and have satisfied themselves as to whether they can continue to do so. If not, the updated guidance should act as a spur to action.
PPF business plan for 2021/22 published
The Pension Protection Fund has published its business plan for 2021/22 in which it lists 20 planned activities and their milestones under the PPF’s five strategic priorities set out in its Strategic Plan for 2019/22. Amongst these are the following:
- Monitoring and assessing key trends affecting the PPF’s levy methodology, including changes to the risks faced by the PPF, the impact of Covid-19 and developments in the consolidator market. The conclusions from this will be set out in proposed 2022/23 levy rules by the end of October 2021, which will be published in final form by the end of January 2022
- Setting a target for completion of the process of increasing PPF compensation in line with the Hampshire and Hughes rulings within two months of the appeal outcomes being handed down, assuming clarity is given and no further appeals are set in train
- Progressing claims made to the Fraud Compensation Fund, working with the DWP and other bodies to ensure that the Fund has the funds necessary to meet the claims on it
This latest business plan is the PPF’s last in its 2019/22 triennium.
Comment
It is always useful to see what the PPF is focussing on as an organisation and we look forward to hearing more about the claims being made on the Fraud Compensation Fund.
GMP inequalities in public sector schemes – Treasury Direction made
The necessary Treasury Direction has now been made, following the outcome of the review (see Pensions Bulletin 2021/13), the effect of which is that those in public sector schemes reaching State Pension Age from 6 April 2021 will have the GMPs earned in public service fully indexed by the public service pension scheme.
“Back to 60” appeal turned away by Supreme Court
The legal campaign by a number of women seeking judicial review of increases to State Pension Age (see Pensions Bulletin 2020/38) appears to have reached the end of the road with it being reported that the Supreme Court has refused leave to appeal because the campaign group had failed to bring a claim before the Court within the allotted time.