The Pensions Regulator (TPR) is consulting on a new Code of Practice for collective defined contribution (CDC) schemes. The draft code outlines how trustees can apply for authorisation and the criteria that the TPR will use to make their initial decision and throughout ongoing supervision. Initially, only trustees of single or connected employer schemes will be able to apply for authorisation to operate a CDC scheme, with applications for these schemes possible from August 2022. Additional regulations and updates to the Code will be required to enable multi-employer and master trust CDC schemes.
One of the key criteria for authorisation will be that the scheme has a sound scheme design. TPR is asking the actuary and trustees to go beyond the tests in the regulations and to also complete modelling in order to examine how the scheme will respond to changes in circumstances – this will help ensure a thorough assessment of how robust the scheme is and understanding of the downside risk and the likelihood of cuts to benefits, as well as the level of variation in benefits. This has some similarities to modelling carried out by many DB schemes, and so actuaries and trustees should be able to build on existing skills and expertise in order to complete this.
The consultation ends on 22 March 2022.
Back to top
TPR has confirmed three new questions for DB schemes and five new questions for hybrid schemes for the 2022 scheme return which will be issued shortly and must be completed by 31 March 2022. They now require:
The new questions will be issued in a separate online form.
In addition, Exchange has not yet been updated to include options for Pension Protection Fund’s latest guidance and assumptions (G9 and A10 respectively) – schemes should select G8 and A9 instead; the PPF will in due course follow up with the scheme to verify which versions were used.
Back to top
Hot on the heels of the regulations nudging members towards guidance (below), the House of Commons Work and Pensions Select Committee (WPC) added some new requests to the DWP's in-tray in its report recommending that the Government and regulators ought to play a more active role supporting savers in making better decisions about their money.
The WPC proposes that a target be set of 60% of people taking-up Pensions Wise appointments or paying for advice and it proposes two trials of automatic appointments, one at age 50, the other when first accessing pension rights. The WPC also recommends overhauling the PAA with the annual limit being removed and advisers encouraged to signpost it.
The report makes a number of other suggestions:
The DWP has published its response to its consultation on proposals to require trustees of occupational pension schemes to nudge members towards obtaining guidance from Pension Wise before accessing flexible benefits (broadly money purchase and cash balance rights). The final regulations will apply to members seeking to access these benefits on or after 1 June 2022 – in line with the Financial Conduct Authority's rules for personal pension providers. Our recent article covered the development in more detail.
Back to top
HMRC has published its latest industry newsletter, which includes commentary on maintaining a protected normal minimum pension age (NMPA), when the standard NMPA increases to 57 in 2028 (a provision within the Finance No2 Bill, currently at Report Stage in the House of Commons).
The newsletter identifies what HMRC would accept constitutes a "substantive request to transfer" having been made before 4 November 2021. This is needed to determine whether individuals who joined (or were in the process of joining) a scheme with a protected NMPA of less than 57 are entitled to that protected NMPA. HMRC's aim is to protect transferred rights rather than enhance them, but one consequence is that protected transferred rights will require ringfencing in the receiving scheme.
Our articles on the Government's explanation of the next steps following its consultation and on the contents of the Finance Bill 2021/22 provide the background.
Back to top
In communications before the publication of the Stronger nudge regulations Government Ministers and the Pensions Regulator (TPR) outlined their thinking on the best time for member guidance. In a letter responding to Stephen Timms (the Chair of the Work and Pensions Select Committee) the Minister for Pensions and Financial Inclusion, Guy Opperman, suggested that "a referral to Pension Wise is most effective and appropriate for members who are considering how to access their defined contribution pension savings and have begun to take steps to find out more" rather than for all over 50's. Further details were contained in the final regulations.
In a response to Stephen Timms, John Glen (the Economic Secretary to the Treasury) indicated that the level and success of the Pensions Advice Allowance (PAA) – which permits up to £500 to be withdrawn from pension pots tax-free on up to three occasions – is being kept under review.
The final act of foreshadowing came in a TPR blog in which David Fairs (TPR's Executive Director of Regulatory Policy, Analysis and Advice) made the point that accessing a pension and obtaining guidance are natural bedfellows. He welcomed the imminent regulations) that would require trustees to offer to make a Pensions Wise appointment for a member who is seeking to access or transfer (in order to access) benefits and hopes that trustees are preparing for the scheme changes. Now the final regulations are here, they will be in a position to do that.
Back to top
Regulations protecting the value of small pots being eroded by charges have been laid in Parliament. The rules are due to come into force from 6 April 2022 and will mean that pension savings with a value of £100 or less invested in the default funds of schemes used for auto-enrolment will be exempt from flat fees.
The DWP has also updated its non-statutory guidance on how to comply with the charge cap to include examples relating to the new requirements. This follows the consultation outcome announced in our November 2021 article.
Back to top
The DWP has published the terms of reference for the independent report by Baroness Neville-Rolfe into recent trends in life expectancy and the range of metrics that could be used when setting State Pension Age (SPA). When published, this report will be considered as part of the next government review of the SPA, which was announced in December 2021 and which must report by 7 May 2023.
Baroness Neville-Rolfe's report will consider:
As part of each SPA review, a separate report is commissioned from the Government Actuary's Department assessing the age of entitlement to State Pension as prescribed by legislation and analysing the latest projections on life expectancy.
Back to top
The Daily Telegraph has reported that an extra 1.2 million people could be pulled into the 40% tax band by 2026 as a consequence of the Government's freezing of the higher-rate tax threshold (at its 2021-22 level). This estimate apparently flows from House of Commons Library analysis commissioned by the Liberal Democrats. While those affected are unlikely to welcome this, it could increase the attractiveness of making/increasing pension contributions.
Back to top
