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What's New in GPT

Welcome to the latest updated version of The Guide for Pension Trustees – May 2018

The Guide for Pension Trustees aims to keep its readers up to date with changes in legislation and regulation, and with developments in practice, that affect pension trustees and others concerned in the management of pensions.

DWP DB White Paper published

In March we referred to this document, which was then in the final stages of being drafted. It has now been published and consequently we have a blueprint for the next stages in the development of a tighter governance regime for DB pensions schemes. Its contents clearly include a political reaction to some recent events where highly-publicised scheme problems have arisen, particularly in respect of scheme funding levels where sponsoring employers have been struggling for some time prior to insolvency.

Highlights for new matters include:

• 

Plans to create a new criminal offence of ‘wilful pension scheme neglect’, along with an extension of the Pensions Regulator’s powers to aid enforcement

• 

A requirement for DB schemes’ trustee boards to appoint a chair, to align the requirements with those already applicable to DC schemes

• 

New consultation on a framework for DB consolidation vehicles, to support the growing movement for scheme consolidation to reduce the number of separate DB schemes in existence in the UK

• 

A commitment by the government to improve the Regulated Apportionment Arrangement (RAA) process, to allow more effective solutions both for members and the sponsoring employer where the latter is facing genuine and severe financial difficulties.

• 

Minor changes to the guaranteed minimum pension conversion legislation to make it more workable.

Items that were proposed but did not make the cut include:

• 

A proposal to force sponsoring employers to gain advance clearance from the Regulator on all commercial transactions where pension liabilities are involved

• 

A proposal to give all schemes overriding power to change indexation without member consent being required

• 

A reduction in the completion time period for actuarial valuation cycles from the current 15 months.

Overall, the paper’s proposals have been generally well received by the pensions industry. However, the lack of parliamentary time in the next few years means that the proposals that require primary legislation are unlikely to be effected until at least 2020. It is of course possible that changed political circumstances by then, and the passage of time, will result in further changes to the proposals.

CDC to come to the UK?

One of the proposed solutions to the largely binary choice between DB or DC benefits for UK pension schemes is Collective Defined Contribution (CDC). This is available in some other countries and was proposed for inclusion under the Pensions Act 2011. However, it was dropped as at that time the assessment was that there was no interest amongst sponsoring employers. That appeared to kill off any prospect of this option being available in the UK for the foreseeable future.

An agreement recently reached between the Post Office and trade unions representing employees on the restructuring of pension arrangements involves a proposal to adopt CDC. With this definite expression of interest in such a basis, the Government is now reportedly looking at whether CDC can be permitted through the use of new secondary legislation. This would allow its introduction without having to queue for parliamentary time behind the Brexit Bills.

If this is achieved and the Post Office application is deemed a success, it has the potential over time of significantly changing the basis on which workplace pensions are provided in the UK.

New items covered in The Guide

Apart from continuing general updating and tidying, there have been a few specific updates made to The Guide since the last update, reflecting changes that have occurred over the period.

Bulk transfers without member consent

New legislation has come into force making it easier to make bulk transfers of members’ benefits, both where those benefits include a DB contracted-out element but the receiving scheme has never been contracted out, and also where the benefits are of a DC type. [See 17.3.4 and 5]

New Regulator statement on management of service providers

The Pensions Regulator has published a statement summarising its expectations of good practice by trustees and scheme managers on the management of their service providers. [See section 8, introduction]

Regulator 2018 annual funding statement

The Pensions Regulator has published its 2018 annual funding statement which outlines, for those schemes doing their funding assessment this year, its expectations of trustees and sponsoring employers in the light of the specific current financial environment, including forthcoming Brexit. [See 24.10.2 (iii)]

Regulator guidance on cyber security

The Pensions Regulator has published regulatory guidance for trustees on principles to protect against breaches of cyber security, together with how to react if security is breached. [See 10.5.15 and 16]

HMRC service update

HMRC has published a newsletter updating stakeholders on the new service to register and manage pension schemes. [See 23.6.5 (Note)]

Pensions Ombudsman’s extended responsibilities

The Pensions Ombudsman has taken over all dispute resolution duties from The Pensions Advisory Service and has changed its address. [See 24.4.2 and 24.4.1]

At the same time, The Pensions Advisory Service has a new freephone contact number. [See 24.3.1.]

Update to governance statement for DC schemes’ annual reports

Additional requirements concerning the reporting of costs and transaction charges in the annual trustees’ report to members have been introduced. [See 12.3.13]

I hope you find the updates useful.

Kevin LeGrand

If you have any questions about this Update, please contact the Helpdesk on 0800 980 1332, or email GPT-Online@pendragon.co.uk.







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