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Pensions Matter at Pinsent Masons: June 2018

Monthly update from the Pinsent Masons Pensions team.

Select a topic to read more:

MPs call for mandatory climate-risk reporting for pension schemes by 2022

The House of Commons Environmental Audit Committee has concluded that the UK government should make it mandatory for large companies and asset owners such as pension funds to report their exposure to climate change risks and opportunities by 2022.  In its green finance inquiry report, the Committee said institutional investors such as pension funds were not considering environmental risks when making investment decisions.  The Committee wants the government to issue immediate guidance making it clear that the law already requires companies to disclose climate change risks where they are financially material.  The Committee also said climate risk should be taken into account for contract-based pension schemes.  Although the Pensions Regulator issued guidance in 2016 and 2017 for investment in occupational pensions, the FCA has not yet published similar guidance for contract-based schemes. 

Regulator's new corporate plan reveals a packed agenda

The Pensions Regulator has published its corporate plan for 2018-2021 setting out how it will take a clearer, quicker and tougher approach to its role.  The Regulator says it will be 'intervening more widely', as one of its priorities is focusing more on proactive and targeted work and using 'a wider range of regulatory interventions'.  It also plans to review and update existing guidance (with a particular focus on data standards and administration). The Regulator plans to increase its headcount by 12% to meet increased workload and remit – and it looks as though the extra staff will be fully occupied: the Regulator now has eight wide-ranging and challenging priorities, including promotion of good trusteeship, the new master trusts authorisation and supervision regime,  automatic enrolment and preparing for Brexit – not to mention its involvement in other diverse projects such as the pensions dashboard, a joint strategy with the FCA, and a new operating model, TPR Future.

Tribunal confirms Regulator can use moral hazard powers retrospectively

A tribunal has ruled that the Pensions Regulator acted lawfully in imposing a financial support direction on ITV and its subsidiaries in respect of the Box Clever TV rental business pension scheme.  Box Clever was formed as a joint venture involving Granada, which is now part of ITV, but collapsed in 2003.  Its pension scheme has a deficit of around £115 million.  The tribunal confirmed that the Regulator can use its 'moral hazard' powers retrospectively, taking into account events which occurred before the relevant legislation came into force.  They also considered whether it was 'reasonable' for the Regulator to use its powers in the circumstances.  ITV has reportedly confirming it intends to appeal against the decision, so we can expect this lengthy saga to continue.

New data protection law now in force

The General Data Protection Regulation (GDPR) came into force on 25 May 2018.  The UK Data Protection Act 2018 became law just before this, allowing GDPR to continue in the UK after Brexit and implementing some derogations into UK law - although these have limited impact in a pensions context.  Now that the new law is in force, schemes which are not already compliant should press ahead with adopting new policies and processes and new contractual terms with suppliers, as well as sending up-to-date privacy notices.  Schemes also need to keep data protection processes under regular review.

New law paves way for single financial guidance body

Legislation establishing the new single financial guidance body (replacing Pension Wise, the Pensions Advisory Service (TPAS) and the Money Advice Service) has received Royal Assent.  Under the new law, personal or stakeholder pension providers will need to direct members making transfer applications to guidance from the new guidance body (and ensure they have taken it up or opted out), with equivalent duties on the cards for occupational schemes.  The Act also requires the Secretary of State to make regulations by June 2018 banning pensions cold calling - or explain to Parliament why he hasn’t done so.  A clause introducing mid-life financial reviews for those aged over 50 has been dropped from the Act, despite support from MPs.

Court fines company and director for auto-enrolment offences

A healthcare company and its managing director have been fined more than £20,000 by magistrates for providing false or misleading information to the Pensions Regulator, and for failing to comply with automatic enrolment duties.  The Regulator's investigation began when a whistleblower complained that workers may have been misled into falsely believing that their pension scheme was up and running.  Although the managing director submitted a declaration of compliance to the Regulator confirming than 25 members of staff had been auto-enrolled, the scheme had not in fact been set up and contributions deducted from wages remained in the employer's bank account.  The Pensions Regulator has also published a blog on how whistleblowing can help crack down on employers who do not comply with their automatic enrolment duties.

Draft master trust regulations amended but not yet finalised

The draft master trust regulations have been revised to reflect the government's response to its recent consultation on the new authorisation and supervision regime (which we covered in our April bulletin).  The main provisions of the regulations and the overall approach have not changed.  The regulations have yet to be finalised, but are expected to come into force on 1 October 2018.

Regulator and Ombudsman agree to share information

The Pensions Regulator and the Pensions Ombudsman have entered into an information sharing agreement, paving the way for information about Ombudsman complaints to be shared with the Regulator to inform its investigations.  The agreement will also permit the Regulator to advise the Ombudsman of concerns about a scheme’s failure to implement policies or procedures recommended by the Regulator.   The agreement is intended to help drive up standards and protect members, as well as helping to combat pension scams.  The Ombudsman's remit has evolved this year after it took over the TPAS dispute resolution function in April.  The Ombudsman has stated that it will provide information so that schemes can ensure their signposting for members reflects the change.

Integrated risk management - new guidance for covenant advisers

Guidance on integrated risk management (IRM) has been published by the Employer Covenant Working Group, a body representing firms which carry out covenant advisory work.  IRM is a risk management tool promoted by the Pensions Regulator as a way of looking at the different pension scheme risks 'in the round' and examining the relationships between them.  The guidance considers the ways covenant advisors can evaluate and manage covenant, funding and investment risks.  It also suggests an IRM approach to scheme valuations.

Final report into Carillion collapse

Parliament's Work and Pensions Committee and Business Energy & Industrial Strategy (BEIS) Committee have published their final report following their inquiry into the failure of Carillion.  The report has criticised several former Carillion directors, the government, financial regulators and auditors, and argues for reform to prevent another similar collapse.

And finally…

When Jon Langford recently retired from his job with Thames Water, he ended an incredible 428 years of service with the company by members of his family.  Mr Langford is the last of 17 family members to have worked for the company since 1850.  His great-great-uncle started the family connection as a clerk, rising to be chairman of what was then the Metropolitan Water Board.  He was later joined by his brothers and their sons, before Mr Langford's father, uncles and cousins also took up a range of posts in the business.  Mr Langford's children work as a nanny and a finance consultant, so unfortunately the family connection has been lost for now – but he hopes his grandchildren may one day restore his links with the company.

Pensions Matter @ Pinsent Masons

Pensions matter to us because they matter to you. As one of the largest dedicated pensions teams in the UK, we are embedded in the pensions industry - but we understand that the value of that lies in our ability to simplify complexity and deliver practical solutions for you and for scheme members. We hope that you enjoy this update, and welcome your feedback.

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