For August 2017 meetings
Welcome to our monthly update on current legal issues for trustees of DC 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.
Death benefits for same-sex spouses/civil partners NEW!
Currently, the Equality Act 2010 permits schemes to calculate a survivor’s pension for a same-sex spouse/civil partner by reference to the member’s service from 5 December 2005 only, rather than by reference to all service. The Supreme Court has now ruled that this restriction is unlawful; same-sex spouses and civil partners should be given the same pension rights as opposite-sex spouses. Read more
ACTION: If your scheme currently provides death benefits on the restricted basis, contact us for help with a rule change and member communications.
Reduction in MPAA UPDATED!
The government has confirmed its intention to reduce the money purchase annual allowance (MPAA), which applies where members have accessed DC pension savings, from GBP10,000 to GBP4,000 with retrospective effect from 6 April 2017. Read more
The provision will be reintroduced in a new Finance Bill after the summer recess. Although it is not yet certain that the reduction will be retrospective, members should now assume that the reduced MPAA will apply from 6 April 2017 unless informed otherwise.
ACTION: Consider whether further member communications about the reduction of the MPAA are required.
GMP round-up NEW!
Our recent round-up of GMP-related issues provides an update on the latest developments, including reconciliation deadlines, potential pitfalls, and concerns about ‘missing’ GMP increases. Read more
ACTION: Ensure your GMP reconciliation process is on track to meet the deadlines; contact us for help with any GMP-related concerns.
Money laundering compliance duties
Trustees have additional compliance duties under new money laundering regulations which took effect on 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. Additional HMRC reporting requirements could be more burdensome; further guidance is expected shortly. Read more
ACTION: Note the new duties and keep a watching brief on further developments.
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.
Where an employer has used the transitional arrangement in relation to DB schemes, which permitted auto-enrolment to be postponed until 1 October 2017, auto-enrolment processes for relevant jobholders should be implemented in September.
ACTION: Liaise with employers about the impact of the forthcoming changes. Assess the need for rule amendments and consultation as appropriate.
Our detailed guide to cybersecurity issues for pension schemes will help you identify simple steps to mitigate cybersecurity risk and ensure that appropriate ongoing monitoring is in place. Our checklist summarises key issues and actions.
ACTION: Assess cybersecurity risk issues for your scheme; contact us for further assistance.
PSC register requirements NEW!
Most UK companies (including corporate trustees) are required to maintain a register of persons with significant control over the company (known as a PSC register) and to file a copy at Companies House each year. The requirements also potentially affect limited liability partnerships within an asset-backed funding arrangement. From 26 June 2017, any PSC register changes must be notified to Companies House within 14 days after the change. Similar rules apply to Scottish limited partnerships from 24 July 2017. Read more
ACTION: Corporate trustees should note the new requirement and notify Companies House of any updates to their PSC register since their last annual confirmation statement.
Early exit & commission-based charges NEW!
From 1 October 2017, early exit charges (charges imposed where members take, convert or transfer scheme benefits before normal pension age) will be subject to a 1% cap and other restrictions. The existing ban on charging members to recoup the cost of adviser commission payments in relation to auto-enrolment qualifying schemes will also be extended. Read more
ACTION: Confirm whether your scheme applies charges of either type and liaise with providers and administrators to ensure future compliance.
Reminder: Protecting DB and DC assets
Trustees of both DB and DC arrangements should understand the protection mechanisms that apply to scheme assets – see, for example, the 2016 DC Code and recent investment guidance for DB schemes. Our updated guide to asset protection provides an overview of the types of protection available for both DB and DC assets. Read more
ACTION: Contact us for help to obtain relevant information, and for a legal review to identify and potentially mitigate any gaps in protection.
TPR annual funding statement
The Pensions Regulator’s latest annual funding statement sets out a robust approach to intervention in valuation processes where it believes schemes are not being treated fairly. There is a particular emphasis on assessing the impact of dividend payments on the sponsor covenant. More generally, the statement emphasises the need to implement contingency plans where a scheme’s funding position is worse than was expected at the last valuation (which the Regulator expects to be the case for many schemes). Read more
ACTION: Trustees should review the statement and be familiar with the Regulator’s expectations and the circumstances in which it may intervene.
Have your say
– The Government is reviewing the alternative quality requirements for DB schemes that are used for automatic enrolment. The consultation ends on 30 August 2017. Read more
Watch this space
– The Pensions Regulator is due to set out its approach to determining whether trustees are acting in a professional or lay capacity (relevant to enforcement and penalties for breach) shortly. Read more
– The government intends to set out its proposals for DB pensions reform, member security and scheme consolidation in a White Paper later this year. Read more