Welcome to our monthly update on current legal issues for trustees of DB and hybrid pension schemes, designed to help you stay up-to-date with key developments between trustee meetings, and to support the legal update item on your next trustee agenda. We also have a separate DC-only briefing.
Prepare for GDPR compliance
New data protection rules will apply from 25 May 2018 under the General Data Protection Regulation. GDPR preparation will be a significant issue, requiring a wide-ranging review of data protection issues and practices. Standard processes, contracts with administrators and other data processors, and member communications will all need to be updated.
Our guide to GDPR compliance planning will help you to prioritise actions to achieve compliance in good time.
ACTION: Ensure that you have a plan in place to achieve GDPR compliance, including updating administration agreements and other provider contracts, plus member communications.
PPF levy 2018/19 NEW!
The PPF is proposing changes to some aspects of the levy process for 2018/19; its final Determination will be published in December. In particular, changes are proposed to the standard form contingent asset agreements that are acceptable for levy purposes, and to the reporting requirements supporting certification of Type A guarantees. Read more
New contingent asset agreements entered into after the revised standard forms are published will be required to use the new version; existing contingent assets (and any executed before the date of publication of the new forms) can be submitted for recognition in the 2018/19 levy, but new forms are likely to be required for 2019/20. Read more
ACTION: If you plan to certify a new or existing contingent asset for levy purposes, ensure that your timetable for Q1 2018 will enable you to meet relevant deadlines.
TPR sets out governance expectations
The Pensions Regulator has published new guidance on the basics of scheme governance, as the first element in its 21st Century Trustee campaign to improve governance standards. The guidance includes links to other material, including a newly-published guide to data improvement plans. Read more
ACTION: Review the guidance and consider whether scheme practices should be updated. Consider whether your data improvement plan meets the Regulator’s expectations.
TPR defines ‘professional trustee’
The Pensions Regulator has announced that paid trustees won’t normally be considered to be professional if they have a membership/employment link with the scheme or relevant corporate group, and they do not act or offer to act as a trustee in relation to any unrelated scheme. Higher standards are expected of professional trustees; status and remuneration are also relevant to enforcement and penalties. Read more
ACTION: All trustees should review the policy and confirm their status. This information must be given on the annual scheme return.
Reduction in MPAA
The Finance (No. 2) Bill 2017 includes provisions restricting the money purchase annual allowance (MPAA) to GBP4,000, and increasing the tax exemption for employer-arranged pensions advice to GBP500. The Bill provides for these provisions to take effect from 6 April 2017; we will report on any changes to the retrospective impact of the provisions as the Bill progresses through Parliament. Read more
ACTION: Consider whether further member communications are required.
Transaction cost disclosure NEW!
From 3 January 2018, the FCA’s Handbook rules will require asset managers, where requested by schemes, to provide certain information about transaction costs. This information includes a breakdown of transaction costs with the total broken down into categories of identifiable costs (including, for example, taxes and securities lending costs); information about administration charges; and other information relevant to assessing whether the costs and charges represent value for money for members.
This will help trustees meet their obligations to review and consider the value for money of transaction costs and administration charges. Read more
ACTION: Liaise with asset managers to gather cost information in Q1 2018 and in good time ahead of the publication of the Chair’s statement.
Anti-money laundering duties UPDATED!
Trustees of occupational pension schemes have additional compliance duties under new money laundering regulations from 26 June 2017.
The most immediate duties relate to record-keeping and to provision of information when entering into a transaction/business relationship with parties (such as banks/some advisers) that are required to carry out money laundering checks. There is also a requirement to provide HMRC with information, normally by 31 January following a tax year in which specified tax charges have been triggered (first deadline: 31 January 2018). Schemes will be required to register with the Trust Registration Service to provide this information.
HMRC has published guidance, including some pensions-specific aspects and details about registering with the Trust Registration Service. We expect further clarification shortly in respect of the trustee record-keeping requirements. Read more
ACTION: Note the new duties and, if relevant, plan ahead to meet the applicable deadline.
Auto-enrolment: upcoming changes
Statutory minimum auto-enrolment contributions for DC schemes will increase on 6 April 2018 (and again a year later) – to find out more, see Part 1 of our updated guide to the auto-enrolment regime.
The Pensions Regulator has published additional guidance on a range of issues linked to the increase in statutory minimum contributions. Read more
ACTION: Liaise with employers about the impact of the forthcoming changes. Assess the need for rule amendments and consultation as appropriate.
Changes for ‘safeguarded-flexible’ benefits
New rules will apply from 6 April 2018, when members with ‘safeguarded-flexible benefits’ (such as benefits with a guaranteed annuity rate) seek to transfer, convert or access their benefits flexibly, and when those benefits are valued for the purposes of the independent advice requirement. Trustees will be required to provide a personalised risk warning highlighting the guarantee and its value. Read more
ACTION: If your scheme offers safeguarded flexible benefits, liaise with administrators to ensure appropriate processes are in place for valuing benefits and providing risk warnings.
Watch this space
– The government intends to set out its proposals for DB pensions reform in a White Paper later this year. Read more
– The government proposes changes to statutory transfer rights from late 2018, to help combat pension scams. Read more