Pensions Bulletin 2022/10
Our viewpoint
17 March 2022
- Fraud compensation levy – large increases from April as Government digs its heels in
- Online Safety Bill extended to cover certain paid-for advertising
- CDC schemes move another step closer
- GMP conversion Bill progresses
- Raising standards in the tax advice market
- Nature-related risks – draft TNFD framework launched
Fraud compensation levy – large increases from April as Government digs its heels in
The Government has responded to its consultation on the fraud compensation levy (see Pensions Bulletin 2021/46) and will be proceeding with increases in the levy ceiling from 30p per member for master trusts and 75p for other occupational pension schemes to 65p and £1.80 respectively. The regulations legislating for this were laid before Parliament on 10 March 2022 and come into force on 1 April 2022 so the new ceiling will apply in the year 2022/23.
The Pension Protection Fund has followed up on this by announcing that the fraud compensation levy for 2022/23 will be at the above ceiling figures. The 2021/22 levy was at the previous ceilings.
As examples of the impact on schemes, a master trust with 20,000 members will pay an additional £7,000 and a non-master trust of the same size will pay an additional £21,000.
The reason for the increase in the levy ceiling is to pay off a government loan to the Fraud Compensation Fund of approximately £250m needed to pay compensation to victims of pension fraud. An extra £21.2m will be raised by the levy in 2022.23, rising to £34.4m in 2030/31.
Comment
The responses to the consultation from the industry were universally negative but the Government has decided to go ahead regardless. The increased costs for master trusts with very large memberships will be especially unwelcome.
Online Safety Bill extended to cover certain paid-for advertising
The Government has announced that it will now be amending the draft Online Safety Bill to impose a new legal duty requiring the largest and most popular social media platforms and search engines to prevent paid-for fraudulent adverts appearing on their platforms. This move has been warmly welcomed by many - including Stephen Timms, Chair of the Work and Pensions Committee - since the Bill, as currently drafted, only covers user-generated scams and the Government has previously rejected numerous calls to include this extension (see Pensions Bulletin 2021/14).
At the same time, the Government has also launched a consultation on proposals for an “Online Advertising Programme” looking to review the regulatory framework surrounding paid-for online advertising and tackle the current lack of transparency and accountability across the whole chain. The consultation welcomes all views on a range of questions and will close on 1 June.
Comment
We stand with those who welcome these measures; it would have been a shame not to seize the opportunity presented by the Bill to try to protect those who might fall victim to scams orchestrated via paid-for advertisements online and the wider proposals being considered under the Online Advertising Programme are also likely to further restore consumer confidence in online advertising.
CDC schemes move another step closer
The main set of regulations enabling the first Collective Defined Contribution (CDC) schemes have now been passed. There was just a minor correction from the version of the regulations originally laid before Parliament in December (see Pensions Bulletin 2021/53) to re-insert some omitted words.
The Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022 (SI 2022/255) come into effect from 1 August 2022, the date from which single-employer and connected multi-employer CDC schemes should be able to apply for authorisation.
Comment
Another piece of the CDC puzzle is now in place, with consultation on another major piece – the Pensions Regulator’s Code of Practice (see Pensions Bulletin 2022/03) – closing next week.
It’s great to see the CDC momentum building, and we hope news of how that can be extended to a wider variety of CDC scheme designs will be forthcoming shortly.
GMP conversion Bill progresses
The Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill (see Pensions Bulletin 2022/08) has found its way to the House of Lords where it will receive its Second Reading on 25 March.
Comment
So far, so good. The Bill is still on schedule to achieve Royal Assent ahead of the Queen’s Speech in May, after which the DWP will be able to focus on the necessary regulations to make GMP conversion a practical solution for GMP equalisation projects for many pension schemes.
Raising standards in the tax advice market
HMRC has published a report setting out the outcomes of an internal review of its powers to tackle poor agent behaviour and actions to uphold its standards for agents. This review forms part of HMRC’s ongoing work around raising tax advice standards which has been informed by responses received to its 2020 call for evidence into raising standards in the tax advice market (see Pensions Bulletin 2020/47).
The report summarises the engagement activity, powers and approaches that HMRC uses to deal with poor tax agent behaviour and acknowledges that more can be done to bring clarity and consistency to HMRC’s relationship with such agents; also that improving analysis of patterns of behaviour would allow resources to be better targeted at the worst behaviours. To this end, HMRC has committed itself to four actions, including undertaking to publish its approach to tax agents in a single policy statement and focus its efforts in this area on the worst agent behaviours.
Comment
The report is one element of the broader project on raising standards in tax advice. It is perhaps the measure least likely to directly impact most pension schemes and their advisers (although it highlights some interesting principles) – for the rest, we note that following HMRC’s November 2021 rethink, there will be various consultations in 2022 exploring alternative options to improve the wider regulatory framework around standards in the tax advice market, testing a potential legislative definition of “tax advice” , as well as for tackling the high cost of claiming tax refunds.
Nature-related risks – draft TNFD framework launched
Nature-related risks and opportunities are increasingly coming under scrutiny by investors. Noting that USD44 trillion, or more than half of the world’s economic output, is highly or moderately dependent on nature, the Taskforce on Nature-related Financial Disclosures (TNFD) has released a beta version of its Nature-Related Risk & Opportunity Management and Disclosure Framework for consultation (registration required).
The draft Framework includes three core components:
- An outline of fundamental concepts and definitions
- Disclosure recommendations
- Guidance for corporates and financial institutions on incorporating nature-related risk and opportunity assessment in their risk management processes
The disclosure recommendations have been designed to be aligned with and additive to the TCFD disclosures. As with the TCFD disclosures, the TNFD disclosures have four pillars – governance, strategy, risk management and metrics & targets.
The TNFD hopes to release its final recommendations in the third quarter of 2023 following an 18 month period of consultation.
Comment
Despite having the endorsement of the Prime Minister and the G7 finance ministers there is currently no suggestion that the TNFD disclosures will become mandatory for pension schemes in the UK in the same way as the TCFD disclosures, although some elements may eventually find their way into the Sustainability Disclosure Requirements (see Pensions Bulletin 2021/43).
In the meantime, the draft Framework provides a valuable resource for pension scheme trustees and sponsors who wish to develop their understanding of nature-related dependencies, risks and opportunities.