Pensions: what’s new this week November 2021 | Allen & Overy LLP
Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pension.
This week we cover topics such as: pension announcements in the fall budget and expenditure review; an update on the progress of the pension scorecard program; and a new report on the climate adaptation of the pension regulator.
- Fall Budget and Expense Review: Pension Announcements
- Dashboards: progress update
- TPR publishes new report on climate adaptation
- DB Master Trusts: New Industry Disclosure Regime
- New FRC publications on mandatory TCFD reporting by companies
- FCA publishes rules for new long-term asset fund
- TPR powers and policy in practice: what do the new criminal offenses mean to you? – recording now available
Fall Budget and Expense Review: Pension Announcements
The fall budget and expenditure review contained a few pension-related announcements, but no general changes to the pension tax framework:
- Fee cap: the government will soon consult on further changes to the regulatory fee cap for defined contribution plans in order to “unlock institutional investments to support some of the most innovative companies”. This is the latest step in a series of government measures aimed at making it easier for pension plans to invest in “productive” investments (including illiquid investments), and follows recent recommendations from the Task Force on productive finance: read the recommendations.
- Tax relief for pensions – supplement for low incomes: in 2025/26, the government will introduce a system allowing 20% of direct top-up payments to be paid to low-income people saving in a pension scheme using a net remuneration scheme ( HMRC will identify and contact individuals, who should then provide additional details to HMRC to have the recharge paid). This would apply to contributions paid from 2024-25 and is implemented in response to the disparity in treatment between low wages contributing to take-home pay and source relief schemes. The government will legislate in this direction in a future budget bill. Further details are contained in the government’s response to a call for evidence on the administration of pension tax breaks: read the answer.
- Increases in the national minimum wage and the national living wage: these will be increased from April 2022; Employers with pay sacrifice agreements should consider whether changes are needed with respect to their workforce.
- Discovery Assessments: Tax laws will be amended to remove uncertainty as to whether HMRC can use discovery assessments to recover certain tax burdens (including with respect to pensions): Read more.
Other documents published to accompany the budget, ahead of the publication of the finance bill next week, confirm that the government is also implementing these previously announced measures:
- Raising the normal minimum retirement age from 2028: Read more.
- Changes to the plan’s payment facility, with respect to annual benefit charges: Read more.
- Changes in tax legislation related to the McCloud recourse for public service pension plans. Further details have now been announced: Read more.
Dashboards: progress update
The Pensions Dashboards Program (PDP) posted an update on the progress of the deployment of pension dashboards, as well as an accompanying blog post. The report summarizes the key steps that the PDP has taken over the past six months, as well as ongoing and upcoming work. A first test phase will take place from December to June 2022; this will be followed by further testing phases.
The PDP continues to urge data providers (including pension plans) to take preparatory steps, including considering the quality of the data and how they will connect to the dashboard ecosystem. Some comments on the PDP’s call for contributions on the proposed phased integration approach indicated that the deployment schedule was too ambitious, especially given the current lack of clarity on specific requirements and the technical framework. The government and the Financial Conduct Authority (FCA) are expected to consult over the coming months on specific scorecard requirements, including the integration approach.
TPR publishes new report on climate adaptation
The pension regulator (TPR) has published a new report on climate adaptation outlining the risks associated with climate change that it considers to be the most relevant for occupational pension schemes, and the approaches taken by TPR to deal with them. both as a regulator and as an organization. This coincides with the publication of reports by other regulators; TPR, the FCA, the Prudential Regulation Authority and the Financial Reporting Council (FRC) have issued a joint statement on the reports: read the statement.
Earlier this year, TPR released a climate strategy, and it is due to release final guidance on its approach to regulating new climate change obligations introduced under the Pension Schemes Act 2021 – you can read more about it on Sustainability and UK pensions: preparing for the new TCFD requirements.
TPR’s latest report contains an analysis of program practices: the main takeaway is that TPR fears that too few programs take due account of climate-related risks and opportunities and that ownership of management policies is too limited. TPR expects administrators to factor climate change into their program’s investment strategies and to devote sufficient time and resources to assessing and managing the financial risks and opportunities associated with climate change. . The results are based on research conducted in 2020; the situation is likely to change rapidly as larger programs become compliant (or prepare to comply) with new climate-related governance and reporting requirements.
DB Master Trusts: New Industry Disclosure Regime
The Association for Pensions and Life Savings (PLSA) has launched a new “self-certification” scheme for multi-employer DB master trusts. The PLSA plans to publish templates for the main database approvals to provide information on their arrangement, with completed certificates that will be posted on the PLSA website. This is intended to help Trustees and Employers who might be considering DB Master Trusts understand the main features of the arrangement (but are not intended to replace a proper due diligence process). The models were designed by an industry working group set up by the Department of Work and Pensions.
New FRC publications on mandatory TCFD reporting by companies
The FRC has released new documents on the reporting of blue-chip listed companies against the recommendations of the Working Group on Climate-Related Financial Disclosures (TCFD Report):
- A report to help companies prepare for mandatory TCFD reporting, which includes practical tips and examples: read the report.
- An overview of the state of current reporting against the TCFD framework in the UK: read snapshot.
- Research on the analysis of climate-related scenarios, including the approaches that have been adopted by companies, typical challenges, good practices and common actions taken to conduct the analysis: read research.
These documents may be of interest to trustees given their approach to issues of governance and disclosure of climate-related investments, including investment management.
FCA publishes rules for new long-term asset fund
The FCA has finalized its rules for a new type of approved fund, the Long Term Asset Fund (LTAF). The LTAF aims to facilitate investment in long-term illiquid assets, including productive financial assets, and is one of many measures that the government hopes will help defined contribution pension plans that wish to invest in these. types of assets. The FCA encourages companies that are considering applying for authorization for an LTAF to engage with it before submitting an application. The PLSA has produced a guide for trustees on LTAFs: Read more.
TPR powers and policy in practice: what do the new criminal offenses mean to you? – recording now available
The recording of our webinar “TPR Powers and Politics in Practice: What Do the New Criminal Offenses Mean to You?” »Is now available online: click here to watch.
In this webinar, our experts Jennifer Marshall, Neil Bowden, Andy Cork and Eve Giles discussed:
- What do the new criminal offenses mean in practice for banks and other lenders, private investors and businesses?
- what impact will they have on the restructuring activity (in distress scenarios and others)?
- what are the practical implications for risk management and due diligence?