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Government confirms reforms on insolvency and corporate governance
The government has confirmed the measures it will take to improve corporate standards where companies are in financial difficulties. Following a broad consultation earlier this year, the government now says it will take forward measures to strengthen shareholder stewardship and bolster the legal framework relating to dividend payments - in particular to tackle concerns about companies avoiding shareholder votes by only declaring interim dividends. The government wants to ensure greater accountability of directors selling subsidiaries in distress, and enhance the recovery powers of insolvency practitioners in relation to schemes designed to remove value from companies at the expense of creditors. The Insolvency Service will be given powers to investigate directors of dissolved companies where they are suspected of having acted in breach of their legal duties.
Government confirms new ESG requirements from October 2019
The government will proceed with plans to require trustees to assess the social, environmental and governance (ESG) factors involved in making investment decisions, and communicate this to members. In the response to its June consultation, the government confirms new regulations will start to take effect from October 2019. Trustees will need to update and publish their statements of investment principles. A statement of members’ views will no longer be required – instead, schemes have the option to prepare a policy on non-financial factors affecting investments, such as members’ and beneficiaries’ ethical views and their views on social and environmental impact matters and quality of life considerations. In another change since the consultation, trustees of defined contribution schemes with over 100 members will need to state a policy in relation to the stewardship of the investments in relation to their default arrangement. We have sent out a separate Update on the steps schemes will need to take under the new regulations.
Pensions dashboard and CDC on government agenda
Pensions minister Guy Opperman has confirmed that the government will continue to engage with the industry as it develops the pensions dashboard. This written statement to Parliament follows speculation earlier this year that the project would be dropped. The government says it will report on the findings of its feasibility study "shortly". It has also pledged to protect pension savers and personal data by legislating where necessary.
Guy Opperman also announced that the government is currently working through proposals for the first collective defined contribution (CDC) schemes in the UK. It intends to launch a formal consultation in the autumn.
Regulator making greater use of enforcement powers
The Pensions Regulator's latest compliance and enforcement report shows it has been making use of enforcement powers for the first time. It has accessed bank statements and financial information that would otherwise have been confidential, through its first use of the production orders under the Proceeds of Crime Act 2002, in an investigation into pensions fraud. It has also issued its first fine against a trustee for failing to complete two scheme valuations.
European Court: Hampshire v PPF
Hampshire v The Board of the Pension Protection Fund (Court of Justice of the European Union)
The European Court has confirmed that EU law requires members of insolvent defined benefit pension schemes to receive compensation worth at least half of their benefits. Pension compensation payable by the Pension Protection Fund (PPF) cannot therefore be capped at less than 50%. The case was brought by a former senior executive of insolvent business Turner & Newell, whose PPF compensation was only around a third of his expected pension entitlement. The European Court ruled that although member states were not obliged to guarantee pension payments in full, limiting any guarantee to less than half of an individual’s entitlement did not satisfy the legal requirement to protect employees on a sponsoring employer’s insolvency. Individuals may rely on this decision in bringing a legal challenge to the PPF. The case will now return to the UK courts, and the PPF has said it will work to implement the judgment as quickly as possible in conjunction with the government – although it expects the number of members affected by the ruling to be very small.
Pension scams: Ombudsman finds against trustees who made transfer to scam scheme
The Pensions Ombudsman has made his first significant finding of maladministration against a scheme which made a transfer into a "scam" scheme. The Ombudsman found that the Police Pension Scheme failed to conduct adequate checks and enquiries into the receiving scheme before making a transfer payment. The Ombudsman said that the scheme should have sent the scorpion anti-scam warnings to the member and sought further information about the proposed transfer. The scheme should have had concerns about the transfer request and should also have engaged directly with the member about the transfer. The Ombudsman has ordered the Police Pension Scheme to reinstate the members' benefits (taking account of any amount which can be recovered from the receiving scheme).
Meanwhile, the Pensions Regulator and the Financial Conduct Authority have launched a new advertising campaign urging savers between 45 and 65 to be wary of unexpected offers about their pensions. This follows YouGov research revealing that almost a third of savers in this age bracket said they would not know how to check whether they were speaking to a legitimate pensions adviser or provider, whilst one in eight said they would trust an offer of a "free pensions review". Victims of pension scams lost an average of £91,000 each in 2017.
21st Century Trusteeship - new guides on conflicts, decision-making and value for members
The Pensions Regulator has published new guides as part of its campaign to raise standards among trustees. The guidance on conflicts of interest reminds trustees they need a policy in place to help identify and manage or avoid conflicts - not only involving trustees but also service providers and advisers. Guidance on meetings and decision-making highlights in particular the role of the trustee chair. The guidance on value for members advises trustees how to assess this and gives examples of good behaviour, such as engagement with members and ongoing monitoring.
Work & Pensions Committee: new pension costs inquiry
Parliament's Work and Pensions Committee has launched an inquiry into pension costs, investment performance and transparency. It has invited evidence on a range of questions that focus on whether pension savers get value for money from financial advisers and providers. The inquiry will also examine whether Independent Governance Committees (IGCs) are effective in driving value for money.
Ombudsman prioritises improved case management
The Pensions Ombudsman is planning to overhaul the way it handles pensions disputes. In its most recent corporate plan, the Ombudsman commits to improved caseload allocation and management and better internal triage, as well as an advanced document management system and better quality assurance processes. The number of complaints received by the Ombudsman has increased by an average of seven percent each year over the past three years, and the integration with The Pensions Advisory Services earlier this year has signalled the start of a new streamlined dispute handling service.
Campaign lawyers urge schemes to step up on climate risk
Non-profit campaigning environmental lawyers Client Earth have written to 14 large UK pension schemes urging them to improve their approach to climate risk. They have asked trustees to make a public statement to members setting out the steps they are taking on climate risk, highlighting a recent case of an Australian pension scheme facing litigation from a member for lack of disclosure on climate risk. Client Earth has published reports focusing on the financial risks posed to pension funds by climate change and how the market is reacting to these risks.
Brexit - Treasury guidance on the impact of "no deal" on pensions
HM Treasury has published guidance on the impact of the failure of the UK and EU to reach a Brexit deal. The guidance covers banking, insurance and other financial services, including pensions. It confirms that firms from the European Economic Area (EEA) will be able to continue to offer products and services to UK-based customers under a three-year temporary permission regime whilst they apply for UK regulatory authorisation. By contrast, in the absence of any action from the EU, UK firms would lose the ability to "passport" into the EEA, and EEA customers (including UK citizens living abroad) would be unable to access services and insurance contracts (including annuities) from these firms. The government is pledging to resolve these issues as far as possible on the UK side, and many UK firms are taking steps to enable them to continue to operate in the EEA (such as by establishing EU-authorised subsidiaries, which may be able to take on existing contracts).
Despite being almost deaf and partially blind, a pensioner from Moray has pledged to continue leading "dancercise" classes to raise money for charity. Although she will be 80 this year, Dot Bremner visits local over-60s groups to share her upbeat dance routines, which include the "couch potato highland fling" and the "football hooligan's dance". She was over 70 when she went back to college to qualify as a fitness instructor, and still enjoys persuading other pensioners to keep active.
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.