30 June 2022
- Pensions Regulator warns trustees that pensions dashboards are coming
- Pensions dashboards – DWP fills in some gaps
- Small pots update
- DC scheme return – Pensions Regulator publishes updated forms
- PASA issues new GMP equalisation guidance
- Actuaries launch review of corporate pensions advice
The Pensions Regulator has launched a campaign to encourage trustees of occupational pension schemes to make progress so that they are ready to connect to a pensions dashboard when the law will require them to do so. The Regulator is concerned that insufficient preparatory work has taken place – as evidenced by some survey results that are to be published shortly.
As part of this campaign the Regulator has issued new “initial guidance” on trustees’ pensions dashboard duties, based on draft regulations issued for consultation by the DWP in January (see Pensions Bulletin 2022/04). The guidance outlines trustees’ legal duties and includes a checklist to help schemes manage their progress, which will be regularly updated.
The Regulator asks trustees to now:
- Check their connection deadline – the date by which they will be required to be connected to the pensions dashboards ecosystem
- Have pensions dashboards firmly on their board agendas
- Be deciding how they will connect – whether through an in-house solution or by using a pensions administrator or integrated service provider
- Be taking stock of and digitising their data – the Regulator points out that this is necessary so that savers are successfully matched to their pensions
The Regulator is also calling on trustees, scheme managers and administrators to attend a pensions dashboard webinar on 28 July at 2.30pm.
We are not surprised that the Regulator has felt the need to launch this campaign. The messaging is straightforward, but for trustees there is likely to be much that they need to do in order to be ready to connect when required to do so.
This is likely to be the first warning shot fired by the Regulator, with more likely to come from it as we move into the summer and autumn and much of the regulatory material is finalised.
The DWP is seeking views on two further pensions dashboard policy issues not addressed in its January consultation (see Pensions Bulletin 2022/04). They are when pensions dashboards should become available to the public, and how information should be exchanged between the Money and Pensions Service and the Pensions Regulator. In both cases indicative draft wording to be included in the necessary regulations has been issued for consultation, which, once settled, will be added into the regulations consulted on earlier.
This unexpected consultation comes as the DWP is reviewing responses to its January consultation for which a full Government response is now promised “in due course”. Back in January the response was promised for the summer.
- Dashboard availability – in relation to the point at which pensions dashboards services will be publicly available (the “Dashboards Available Point”, or DAP) the DWP proposes to give 90 days’ notice of the date, by means of a notice to be issued by the Secretary of State. Prior to this date, a “controlled set of volunteer data providers” will connect to the dashboards ecosystem to “test its effective functioning”. There will also be “significant communications between the Government, MaPS, and industry in the lead up to any announcement” so there should be no surprises when the DAP is formally announced. The consultation document is silent on what date the Government currently has in mind, although current expectations are that it may be in summer 2024
- Information sharing – on MaPS sharing information with the Regulator the DWP proposes to empower MaPS to do so in order to enable or assist either body to exercise their functions in connection with the Pensions Dashboards regulations. The consultation goes on to list examples of the data likely to be shared. Generally, this will relate to scheme data and data relating to dashboard processes. Other than in exceptional cases personal data won’t be copied from MaPS to the Regulator
In addition, the DWP intends to issue separate regulations to enable the Regulator to share restricted information with MaPS where the Regulator considers that such sharing would enable or assist MaPS to exercise its functions in connection with the Pensions Dashboards regulations. These regulations are not in the latest package.
Consultation closes on 19 July 2022.
The information sharing aspect of these proposals appears uncontroversial. As to the dashboards available point, the Government appears to remain wedded to the idea of a ‘big bang’ switch on without having considered the IT technical risks surrounding this and the potentially huge spike in queries to schemes from members. There are alternatives, such as phasing by age, which may be safer and not risk undermining all the work that will have gone in to making dashboards a reality.
The Small Pots Co-ordination Group has issued its second report into solving the small DC pots problem. This industry group, jointly convened by the Association of British Insurers and the Pensions and Lifetime Savings Association, has been exploring various solutions to tackle the issue of small deferred pension pots in the automatic enrolment workplace pension market. It previously prioritised three models (see Pensions Bulletin 2021/41) and has now completed a narrowing for further exploration. The models now being considered are:
- Pot Follows Member – when an employee moves jobs, their deferred pension pot in their former employer's scheme automatically moves with them to the new employer’s scheme, with the opportunity to opt out
- Multiple Default Consolidators – certain pots will automatically be transferred to one of a number of small pots consolidators, with savers being given an opportunity to opt out. If a person has multiple deferred small pots, these could be linked by the consolidator. This model comes with a variety of design choices. An alternative in which there is only one single consolidator has been discounted and will not be progressed further
- Member Exchange – a member with a small deferred pot in one pension scheme and an active pot in another scheme is identified and their deferred pot is merged into the active pot. The report notes that the principles of this have been tested with three master trusts
The report suggests that a combination of these three models may be the best approach. It also notes that legislation will be needed for the proposed model(s) to work effectively.
The group now intends to conduct further analysis on the three models so that it can be understood which combination offers the best outcome for savers. This analysis should include which models consumers prefer, and their cost and effectiveness in reducing the number of small pots. The analysis must also consider the impact of any future combination of models on the structure and sustainability of the pensions market.
The underlying complexity to solving what might appear on the surface to be a straightforward issue should not be underestimated. We believe there is still some way to go before a solution is found. Once agreement to the way forward has been reached there will need to be a commitment for the necessary law and rules changes by the DWP and FCA respectively.
The Pensions Regulator has issued new example forms for the DC scheme return. Schemes that need to complete a return this year (which includes DC schemes with 12 or more members) will receive them between July and December 2022.
Some (mainly larger) DC schemes will receive a scheme return in two parts this year.
- Part 1 – which has to be completed on a separate online form – will contain new questions about whether the scheme is required to do the more detailed value for money assessment (for schemes with <£100m total assets and operating for 3 or more years – see Pensions Bulletin 2021/40) as well as the website addresses for the scheme’s Chair’s Statement, Statement of Investment Principles, Implementation Statement and climate change report (if relevant)
- Part 2 of the return will contain the rest of the questions, which will be the same as on previous scheme returns and can be completed in Exchange as usual
This new approach follows on from similar requirements introduced for DB and hybrid schemes at the end of last year – see Pensions Bulletin 2021/53.
The Pensions Administration Standards Association has published new GMP equalisation guidance which seeks to provide assistance to pension scheme administrators involved in a project to address past transfers out that were carried out on an unequalised basis.
The guidance presents information in a tabular ‘checklist’ form in which for each generic issue that is set out, there is a suggested trustee decision and related administration implications.
PASA hopes that both trustees and administrators will find the checklist useful to inform discussions, capture the decisions made, and provide an audit trail for the future.
The Institute and Faculty of Actuaries has launched a review of certain advice given by actuaries to the sponsors of UK DB schemes – namely funding and strategic advice which led to material changes being considered/agreed/adopted. The IFoA notes that the range of advice in this area is potentially wider than advice given to trustees and may involve other professionals.
Submissions are requested by 2 September 2022, with a form provided for this purpose. In associated guidance the IFoA states that it will consider a number of matters when reviewing an example of work, namely the presentation and context of advice, and the role of the actuary, and compliance with various professional standards, including that on review of work and conflicts of interest.
The intention is to publish a report in early 2023, with private feedback being provided to respondents around a month before publication.
This is the latest “thematic review” in relation to pensions advice. Since the review programme was launched in September 2019, the IFoA has also reported on actuarial factors used to calculate benefits in UK pension schemes (see Pensions Bulletin 2020/51) from which a number of actions are now being progressed.
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.