- Pensions Regulator’s new objective – In the 2013 Budget the Chancellor announced that the Pensions Regulator will be given a new objective. The precise wording is still to be confirmed but the Chancellor said that, in future, the Regulator would have to have regard to the “growth prospects of employers”. Read more.
Action: Employers and trustees should consider how this may impact their scheme’s funding arrangements and whether they should factor the new objective into current negotiations.
- Abolition of DB contracting-out – The Chancellor also confirmed in his Budget speech that the introduction of the single-tier state pension (and consequently the abolition of DB contracting-out) will be brought forward to April 2016. Private sector employers will be able to amend their scheme to offset the increase in their national insurance contributions resulting from this. Read more.
Action: Employers should assess how the abolition of DB contracting-out will impact them and consider what, if any, changes they plan to make to their scheme.
- Downgrading of RPI – In a surprise move, the UK Statistics Authority has announced that the Retail Prices Index (RPI) will no longer be designated as a national statistic, on the basis that it does not meet international standards. This has created uncertainty over whether RPI remains a suitable index for determining pension increases and revaluation under DB schemes.
Action: Trustees and scheme sponsors should take advice on how the downgrading of RPI impacts their scheme.
- DC Governance – Auto-enrolment means that the governance of DC schemes is in the spotlight now more than ever. The Pensions Regulator has recently issued a draft Code of Practice and regulatory guidance on DC governance, which includes 31 quality features that it would expect to see in a good quality DC scheme.
Action: Trustees of DC schemes and pension providers should review their schemes to ensure that they meet the requirements set out in the Regulator’s new Code of Practice and regulatory guidance.
- New Fair Deal guidance – HM Treasury is expected to finalise its new Fair Deal guidance shortly. If the new guidance follows the draft issued last November, private sector employers will no longer be able to provide broadly comparable schemes to newly transferred staff, who will instead have to be given continued access to the relevant public service scheme.
Action: Private sector contractors and public sector bodies covered by Fair Deal need to consider how the new guidance will impact future outsourcings and re-tenders. Read more.
- New disclosure requirements – New disclosure requirements for occupational and personal pension schemes are due to come into force on 1 October 2013. The most significant changes include new requirements for DC schemes to provide information to members about lifestyle investment options (including target date funds) and a clarification of the rules on electronic disclosure.
Action: Trustees and pension providers must ensure that they are ready to comply with the new disclosure requirements by 1 October 2013.
- Auto-enrolment simplification – The DWP plans to make various technical changes to the auto-enrolment legislation including changing the definition of ‘pay reference period’ to align it to the way in which payroll systems currently operate and introducing an exemption for workers with fixed or enhanced protection. It is also considering introducing an easement for employers that automatically enrol all of their staff. Read more.
Action: Employers will need to review their auto-enrolment processes and communications in light of these changes, including the process for dealing with individuals with fixed or enhanced protection.
- New clearing and reporting requirements for OTC derivatives – new clearing and reporting requirements for over-the-counter (OTC) derivatives are due to apply to pension schemes from August 2015.
Action: Although these new requirements are still some way off, it is important that trustees understand these changes, including how they will impact the cost of entering into OTC derivatives and the new collateral requirements.
- Cash incentives for agreement to scheme changes – Any employers planning to offer incentives in return for the agreement of their staff to proposed scheme changes (such as closure to future accrual) must ensure that they comply with the Regulator’s 2008 guidance on employee consultation exercises.
Action: Employers need to carefully consider the impact of the Regulator’s guidance before undertaking a consultation exercise in which they are planning to offer an incentive to staff who agree to the proposed changes.
- Changes to TUPE requirements – From 1 October 2013, where staff have access to a DC occupational pension scheme immediately before a TUPE transfer, the new employer will be able to match the contributions paid by the former employer, instead of matching contributions up to 6%. Read more.
Action: Companies need to be aware of these changes when considering internal reorganisations or the acquisition of staff from another business.