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Pensions Matter at Pinsent Masons: October 2018

Monthly update from the Pinsent Masons Pensions team.

Select a topic to read more:

Regulator's introduces one-to-one supervision for biggest schemes
Schemes may refer complainants to Ombudsman before pursuing IDRP
Ombudsman announces fixed awards for distress and inconvenience
21st Century Trusteeship: value for members
Airways Pension Scheme trustees continue RPI appeal
PPF levy estimate falls, despite highest ever level of claims
PPF changes on hold whilst government considers European court ruling
Master trusts – Regulator's tips as authorisation window opens
And finally…

 


 

Regulator's introduces one-to-one supervision for biggest schemes

The Pensions Regulator has announced a new supervision regime to monitor DB schemes more closely, following its pledge to be clearer, quicker and tougher.  Schemes of all sizes can expect the volume and frequency of their interactions with the Regulator to increase, with the aim of identifying and remedying potential risks to savers at an earlier stage.  From October 2018, there will be dedicated one-to-one supervision for 25 of the biggest schemes, with this approach being rolled out to more than 60 schemes over the next year.  TPR will also be contacting a broader range of schemes to assess compliance with the Regulator’s 2018 funding statement – in particular whether the schemes are being treated fairly when it comes to dividend payments to shareholders.  Over time, this approach is expected to apply to hundreds of schemes and to tackle other risks.

Schemes may refer complainants to Ombudsman before pursuing IDRP

The Pensions Ombudsman and the Pensions Regulator have confirmed that they will not look to penalise schemes for signposting members to the Pensions Ombudsman where complaints have not first gone through the scheme’s internal dispute resolution procedure (IDRP).  The Pensions Ombudsman now operates an Early Resolution Service in addition to its normal Adjudication Service, and complainants wishing to use that informal, streamlined process will not need to have used their scheme’s IDRP, if the parties are happy with that.  The law has not yet been updated to reflect the Ombudsman’s new processes, and Brexit pressures mean this may not happen before 2020, but the Ombudsman and the Regulator have confirmed schemes need not wait before updating their signposting.

Ombudsman announces fixed awards for distress and inconvenience

The Pensions Ombudsman has decided to introduce fixed awards for non-financial injustice (also known as awards for distress and inconvenience).  The change is designed to increase transparency and consistency and manage expectations for all parties.  There will now usually be five categories of non-financial injustice.  Awards will range from zero (for “nominal” injustice, where an apology would be adequate redress) to over £2,000 (for “exceptional” injustice, where severe injustice is aggravated by factors such as wilfulness or recklessness by the trustee or employer, or their repeated failure to engage with the Pensions Ombudsman.  The Ombudsman’s guidance sets out his general approach to assessing these awards and examples of factors which will be taken into account.

21st Century Trusteeship: value for members

The latest guidance from the Pensions Regulator's 21st Century Trusteeship campaign focuses on value for members.  Value for members assessments are a legal requirement for trustees of defined contribution schemes.  The Regulator says that schemes should adopt a proportionate approach that they can repeat each year.  The Regulator strongly recommends that defined benefit trustees use these assessments too to help ensure good member outcomes.  The Regulator points out that government proposals to require defined benefit schemes to submit an annual chair's statement are likely to involve a value for members assessment.

Airways Pension Scheme trustees continue RPI appeal

The trustee of the Airways Pension Scheme has confirmed it will continue its appeal against the Court of Appeal decision that it had invalidly amended the scheme rules.  The trustee had granted discretionary increases to mitigate the negative impact on members of a move from RPI to CPI indexation, but the Court of Appeal decided this was an improper use of the amendment power.  The trustee will now seek permission to use scheme assets to fund the appeal (and meet British Airways’ costs if the appeal is unsuccessful).  The appeal is expected to be heard by the Supreme Court in the second half of 2019.

PPF levy estimate falls, despite highest ever level of claims

The PPF has confirmed that its estimate of the levy it will collect for 2019/20 is £500 million – down from the £550 million estimate for 2018/19.  In its consultation on 2019/20 levy rules, the PPF also confirms that recently-introduced changes are working well, so there are only minor adjustments proposed for 2019/20.  Last year saw the highest level of claims in the PPF’s history, but the PPF confirms its funding position is strong and it is on track to meet its long term funding objective.  Its consultation also sets out proposed rules which will allow the PPF to charge a levy to commercial consolidation vehicles – although the PPF expects this to evolve as the regulatory framework for consolidators is established.  The PPF expects to finalise its rules and publish the levy determination in December 2018.

The consultation also reminds schemes with type A or B contingent assets containing a fixed cap that these will need to be re-executed if they are to be recognised in the levy calculation for 2019/20.

PPF changes on hold whilst government considers European court ruling 

The government has confirmed some minor changes to the way Pension Protection Fund (PPF) compensation is calculated, but these will not be as far reaching as it originally planned.  The government says it will be considering the impact of the European court's recent Hampshire judgment and may put forward more comprehensive proposals in the future.  It consulted over the summer on regulations affecting PPF compensation, but these may have resulted in individuals receiving less than 50% of their expected pension benefits, which would run counter to the Hampshire judgment.  

Master trusts – Regulator's tips as authorisation window opens

The Pensions Regulator has published the final version of its master trusts authorisation decision-making procedure, setting out the process the Regulator follows when deciding whether to authorise a master trust.   The Regulator has also published the lessons learned from the master trusts readiness reviews it has been carrying out over the summer.  The Regulator reminds master trust providers that the window for authorisation does not close until April 2019, urging them not to rush to submit applications by 1 October 2018 but instead wait until they have all the information they need (whilst not providing additional information unless it is relevant).

And finally…

A retired surveyor from Dumfries & Galloway has finally fulfilled his lifetime ambition to travel the world after working for 60 years. Alan Kay travelled with his daughter around Asia and Australia after his wife gave him a six week pass – on the condition that he return to finish building work on their house.  Mr Kay had been working since the age of 15 and finally went to university at age 60 to qualify as a chartered surveyor.  He retired at last aged 76 and set off on a 25,000 mile trip during which he also took a cookery course, enjoyed a cocktail in the world's highest bar and rode a bicycle for the first time in 25 years.  A video of his journey has been a hit online – he hopes it will inspire families to travel together.

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