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!
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. Read more
ACTION: Ensure that you have a plan in place to achieve GDPR compliance, including updating administration agreements and other provider contracts, plus member communications.
TPR defines ‘professional trustee’ NEW!
The Pensions Regulator has announced that trustees who are remunerated for their trusteeship won’t normally be considered to be professional trustees 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 (for example, in relation to trustee knowledge and understanding); 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.
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.
Death benefits for same-sex spouses/civil partners
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
The government intends 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. Although it is not yet certain that the reduction (in a new Finance Bill) will be retrospective, members should now assume that the reduced MPAA will apply from 6 April 2017 unless informed otherwise. Read more
ACTION: Consider whether further member communications about the reduction of the MPAA are required.
Reminder: Protecting DB and DC assets
Trustees of DB and DC arrangements should understand the protection mechanisms that apply to scheme assets. 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.
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.
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.
PSC register requirements
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. Any PSC register changes must now be notified to Companies House within 14 days. Similar rules apply to Scottish limited partnerships (for example, within an asset-backed funding arrangement). 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 UPDATED!
From 1 October 2017, early exit 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. Statutory guidance on calculating the cap has now been published. Read more
ACTION: Confirm whether your scheme applies charges of either type and liaise with providers and administrators to ensure future compliance.
Changes for ‘safeguarded-flexible’ benefits NEW!
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 to members with safeguardedflexible benefits who are seeking to transfer, convert or access their benefits flexibly; this will highlight the guarantee and its value. Read more
ACTION: If your scheme offers safeguardedflexible 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, member security and scheme consolidation in a White Paper later this year. Read more