Pensions Bulletin 2021/37

Our viewpoint

The Government sets aside the earnings element of the triple lock, but for one year only

On 7 September the Government announced that it will table legislation to set aside, for 2022/23 only, the earnings growth element of the triple lock formula used to determine the uprating of the basic and new state pensions.  This will mean that these state pensions will increase by the higher of inflation or 2.5% in April 2022 – and in so doing temporarily break with the Government’s 2019 manifesto pledge to maintain the triple lock.  Earnings growth is the only element of the triple lock that is set out in legislation – hence the need to legislate.  The Social Security (Up-rating of Benefits) Bill was published on 8 September.

Last year legislation was enacted that enabled these State pensions to be reviewed in the face of the likelihood of average earnings falling (see Pensions Bulletin 2020/48).  However, as anticipated when the potential negative impact that the pandemic would have on earnings in 2020 became apparent (see Pensions Bulletin 2020/26), the growth in earnings that would feed into the formula this year is extraordinarily high – currently estimated to be between 8% and 8.5%.  The Government has therefore decided that the fairest approach for both pensioners and younger taxpayers is to remove this element from the triple lock formula for this year on the basis that it is artificially inflated.

The Government says that it “plans to return the earnings element of the Triple Lock next year”.


This announcement has, unsurprisingly, caused quite a commotion, in particular along the opposition benches.  However, it is difficult to see what other option the Government had, as the earnings measure has undoubtedly been artificially inflated as a result of the drastic Covid-19 induced impact on earnings last year in a manner that could not have been anticipated when the manifesto pledge to retain the triple lock was made.

While the future of the triple lock is still uncertain, the Government’s statement appears to confirm that it expects to deploy it next year.  The debate around intergenerational fairness continues!

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Notifiable events amendments consultation launched

The DWP has launched a consultation on regulations to adjust the type of events that DB scheme sponsors are required to notify the Pensions Regulator about, and to set out new duties for them to report and provide information to the Regulator about three of these events.  These draft regulations had been expected following a Commencement Order made in May on aspects of the Pension Schemes Act 2021 (see Pensions Bulletin 2021/23).

Notifiable events

The draft regulations introduce two new employer-notifiable events (a decision in principle to sell a material proportion of the business or assets of a sponsoring employer; and a decision in principle to grant or extend a relevant security in priority to scheme debt) and remove the existing ‘wrongful trading of the sponsoring employer’ notifiable event.

In respect of the two new notifiable events:

  • A material proportion of the business is defined as one that accounts for more than 25% of annual revenue, and a material proportion of assets is defined as being more than 25% of the gross value of the employer’s assets
  • A relevant security is defined as one granted or extended by the employer, or one of more of its subsidiaries, in either case comprising more than 25% of either the employer’s consolidated revenue or its gross assets. The definition goes on to set out what type of security is included and excludes refinancing of existing secured debt and small increases in security

‘Statements of intent’

There are also new requirements to give a notice and statement to the Regulator for three notifiable events.  Previously known as statements of intent, these must be given when the main terms of the relevant event have been proposed, and the statement must indicate the impact on the scheme of the transaction and what action is being taken to mitigate any detrimental effects.  As such, they are intended to be a follow-up to the initial notification.

The events are:

  • The intended sale by the employer of a material proportion of its business or assets, in respect of which the main terms have been proposed
  • The intended granting or extending of a relevant security by the employer over its assets which would result in the secured creditor being ranked above the scheme in the order of priority for debt recovery, in respect of which the main terms have been proposed
  • Where the employer is a company, the intended relinquishing of control by a controlling company of the employer company, in respect of which the main terms have been proposed, or where the controlling company relinquishes such control without a decision to do so having been taken, the relinquishment of control of the employer company by the controlling company

Consultation ends on 27 October 2021.  It is not clear from when these new requirements will come into force, but they will need to be accompanied by material from the Pensions Regulator on which consultation has yet to commence.


These new requirements are broadly as expected, with some modifications made to earlier proposals to reflect some practicalities of operation.  All sponsors of DB schemes will need to be aware of these proposed requirements and make sure that they update their processes in time to ensure they can comply with them.

However, deciding when a ‘decision in principle’ has been made (the trigger for the two new notifiable events) may pose practical questions for Company Directors, as may determining when ‘main terms have been proposed’ (the trigger for the new statements).  Hopefully the Regulator guidance to come will assist.

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No appeal against PPF compensation cap decision

The Pension Protection Fund has announced that the DWP has chosen not to appeal the July decision of the Court of Appeal to the Supreme Court (see Pensions Bulletin 2021/30), with the effect that the PPF compensation cap is now unlawful and no longer operative.  As a reminder, the cap limits the compensation for members who transferred to the PPF before they reached retirement age to around £35,000 pa (depending on age).  The PPF estimated in last year’s accounts that the future cost of removing the cap for those who were already in the PPF would be in the region of £200m.

The PPF confirms that it will continue to pay members their current level of compensation until it has planned its implementation of the judgment, with back payments presumably payable to those who continue to have their pensions restricted.

As yet there has been no adjustment to the guidance for undertaking PPF-related valuations, so whilst schemes can currently continue to allow for the cap we expect it will be removed in future versions of the guidance.


Affected members will clearly be delighted with this news – some could see substantial increases to their PPF compensation payments.

The impacts for schemes are more nuanced and wide-ranging.  There will be the additional £200m liability for the PPF to pay (which may or may not be raised through levies) and schemes with a significant number of capped members, especially Executive schemes, could see large increases in their levy bills.

The level of PPF compensation also impacts the priority order when a scheme winds up outside the PPF, so any schemes that reduce transfer values or are buying out benefits on a PPF+ basis will need to consider the impact on their processes.

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FRC lists successful signatories to the UK Stewardship Code

The Financial Reporting Council has published a list of 125 applicants who have successfully met the high standards necessary to be signatories to the UK Stewardship Code (see Pensions Bulletin 2019/41 for more detail).

These signatories represent £20 trillion of assets under management and comprise 90 asset managers, 23 asset owners and 12 service providers.  189 organisations applied and those who did not make the list (57 asset managers, 5 asset owners and 2 service providers) commonly did not address all the principles relevant to their role or sufficiently evidence their approach.

Unsuccessful applicants are able to reapply in future application windows and those who have made the list will need to continue to meet evolving expectations to stay on the list.


We expect that the high standards that need to be met in order to be included on this list – and the individual feedback given to those who did not fully meet them at this first assessment – will continue to drive improvements in stewardship across the UK investment industry.  And we are of course delighted to report that we made the list!

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PPF to continue with 90-day levy payment window

With levy bills for 2021/22 due to be sent out in the autumn, the Pension Protection Fund has announced that the 90-day interest free payment extension, introduced in July 2020 in response to pressures being experienced by some levy payers, will continue to operate for 2021/22 levy bills.

As before, the extension from the normal 28 day period is not automatic, but requires an online form to be completed, within that 28 day period, in which the levy payer has to explain how they continue to be affected by the pandemic.  They must also commit to paying their bill within 90 days in order that the statutory interest that would normally accrue can be waived.

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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.