Tipping point for consolidation?
The Month In Pensions - June 2020
Hello, and welcome to the Month In Pensions for June 2020, brought to you by the pensions team at Gowling WLG.
I'm Ian Chapman-Curry and I'll be looking at one the themes that has excited the pensions industry in June before taking you through the key points of this month's main legal and policy pensions developments.
I'll then be joined by Christopher Stiles, a partner in the pensions team, to discuss his latest Insights on:
- The Corporate Insolvency and Governance Bill 2020; and
- Pensions solutions for distressed defined benefit schemes and/or employers.
We'll then take a look at what is coming down the tracks for the industry in July 2020.
Theme for June 2020 - Tipping point for consolidation?
Sometimes ideas generate a lot of noise and fury and then disappear. Sometimes, ideas take root and flourish. In the early 2010s, two ideas promised to change workplace pension savings. One was automatic enrolment and the other was defined ambition. Auto-enrolment is now embedded as a key part of the pensions landscape in the UK. Defined ambition? Not so much. At least, not under this name.
As we sit at the beginning of this decade, two more ideas promise to shake up the pensions industry. They both take the idea of consolidation and apply it respectively to defined benefit schemes (in the form of superfunds) and defined contribution arrangements (in the form of collective defined contribution (CDC)). This month, The Pensions Regulator (TPR) issued interim guidance on superfunds, opening the door to the first transactions in this space. CDC already has an employer backing it in the form of Royal Mail.
So, where will we find ourselves in ten years' time? Will we look back and see two ideas that seemed promising but never quite lived up to their potential? Or will they have become established parts of the pensions landscape? At this stage, it seems likely that superfunds will find a niche but will not be the mainstream solution for many defined benefit schemes. And there is a chance that Royal Mail's CDC scheme will be an unusual rather than typical arrangement in the pensions world. Time will tell, and we'll all move on to the next big ideas.
This month's main developments
TPR updates its measures on helping pension schemes tackle COVID-19 challenges
TPR is making changes to its easements on suspension or reduction of deficit repair contributions (DRCs) and reporting requirements. TPR notes that only around 10% of schemes have agreed a temporary suspension or reduction of deficit repair contributions (DRCs) so far. TPR acknowledges that temporary suspensions or reductions of DRCs may still be needed by schemes. TPR expects that most trustees should now be able to undertake more accurate and detailed due diligence on the employer's financial position before agreeing a new suspension or reduction.
In addition, TPR has announced that it is back to business as usual for certain aspects of the reporting regime that were suspended as part of the package of measures designed to help pension schemes cope with challenges arising from COVID-19. From 30 June 2020, master trusts should return to issuing a formal report to notify TPR of all triggering and significant events. From 1 July 2020, pension trustees should resume reporting to TPR on:
- suspended or reduced contributions (in addition, TPR will expect a revised recovery plan or a report of missed contributions);
- late valuations and recovery plan not agreed; and
- delays in CETV quotations and payments.
Easements that will continue include allowing 150 days rather than 90 days for reporting late payments of contributions. In addition, TPR has confirmed that it will not be looking to take enforcement action in respect of late accounts signed off by 30 September 2020 and won't be reviewing Chair's statements before the autumn (with the implication that enforcement action will be delayed until this point in time).
You can visit tinyurl.com/TMIP0620A or check out the show notes for TPR's press release announcing the measures being taken to help pension schemes tackle COVID-19 challenges
The Financial Conduct Authority (FCA) published a package of measures designed to address weaknesses in the DB pension transfer market.
It included a policy statement setting out its final rules and guidance on pension transfer advice, a guidance consultation paper on advising on pension transfers, and an update on the FCA's DB transfers work (including its next steps). The most consequential step is banning contingent charges by requiring advisers to charge the same monetary amount for advice to transfer as for advice not to transfer (except for limited carve-outs for specific groups of consumers with certain identifiable circumstances). These rules will come into force on 1 October 2020.
You can visit tinyurl.com/TMIP0620B or check out the show notes for the FCA's DB transfer documentation.
Government fast-tracks new corporate insolvency legislation
The Corporate Insolvency and Governance Bill 2020 (the Bill) was published and had its first reading in the House of Commons on 20 May 2020. The Bill is intended to offer protection to businesses that are having difficulties trading due to the current economic downturn and this raises a number of questions for trustees of occupational pension schemes (which are covered in more detail in our Insights - see below). The Bill is being fast tracked through Parliament and is expected to pass into law before the end of June.
You can visit tinyurl.com/TMIP0620C or check out the shownotes for our Insight 'The Corporate Insolvency and Governance Bill 2020: what pension scheme trustees need to know'.
And you can visit tinyurl.com/TMIP0620D or check out the shownotes for our Insight Pensions solutions for distressed defined benefit schemes and/or employers.
Pension Schemes Bill 2019 - 21 remains a 'top priority' for the government
The report stage of the Pension Schemes Bill 2019-21 will commence in the House of Lords on Tuesday 30 June 2020. In addition, the director of private pensions and arm's length bodies at the Department for Work and Pensions (DWP) has confirmed that the Pension Schemes Bill 2019-21 will continue to be a priority despite delays as a result of the COVID-19 pandemic.
TPR launches new interim regime for emerging superfund pension market
TPR has unveiled the high bar it expects new superfunds to meet to ensure savers in defined benefit schemes are protected ahead a legislative authorisation regime coming into force. The new guidance, which comes into force immediately, sets out TPR's expectations for how defined benefit consolidator superfunds and other new consolidation vehicles will work.
You can visit tinyurl.com/TMIP0620E or check out the shownotes for our Insight on TPR's guidance framework for superfunds.
Employer insolvency and pension solutions for employers in distress - interview with Christopher Stiles
Ian is joined on the podcast by Christopher Stiles to discuss two Insights on defined benefit schemes in distress and, closely related, the pensions aspects of The Corporate Insolvency and Governance Bill 2020.
The interview is not available in this transcript, but, if you want to read the full text of Chris's Insights, Pensions solutions for distressed defined benefit schemes and/or employers is available at tinyurl.com/TMIP0620C and The Corporate Insolvency and Governance Bill 2020: what pension scheme trustees need to know is available at tinyurl.com/TMIP0620D and links to both are also set out in the show notes on your podcast player.
July 2020 in pensions
Now it is time to look forward to what the coming month will bring in pensions.
As I mentioned earlier, on the 1 July 2020 most scheme reporting duties recommence when easements to the Regulator's reporting obligations are scaled back.
On the 2 July 2020 the appeal is due to be heard in the case of Safeway Ltd v Newton and another [2017] EWCA Civ 1482. This is a hearing in the Court of Appeal after the case was remitted back from the European Court of Justice following the ECJ's judgment in October 2019.
Also on the 2 July 2020 - the Pensions Climate Risk Industry Group consultation on guidance on climate change risk closes. The consultation is on draft guidance that is intended to help pension scheme trustees implement the recommendations of the Task Force on Climate-Related Financial Disclosures on integrating, managing and reporting on climate change risks.
On the 6 July 2020 the Money and Pensions Service will launch a call for input on pensions dashboards. This will involve the Money and Pensions Service asking the pensions industry for input on its data scope and data definitions working papers that were issued in April 2020.
And finally, on the 31 July 2020 the Money and Pensions Service informal market engagement on pension dashboards ends. This will bring to an end the Money and Pensions Service's initial engagement with potential suppliers of the digital architecture for pensions dashboards.
Subscribing to The Month In Pensions
And that is nearly all from The Month In Pensions for June 2020. We always finish off with a non-pensions recommendation - something a little lighter than reading all 242 pages of the Corporate Insolvency and Governance Bill 2020.
Before we get to that, just a reminder that you can get in touch if there are any items you'd like to see covered in future episodes of The Month In Pensions - just contact me, Ian Chapman-Curry - my contact details are at tinyurl.com/GWLGICC and you can get more from the pensions team at Gowlingwlg.com/Pensions-UK.
If you liked this podcast, please rate or review it and, if you hit the subscribe button, The Month In Pensions will appear in your podcast feed each month. Finally, please feel free to share the podcast with colleagues or anyone who might be interested in staying on top of developments in the pensions world.
Non-pensions highlight of the month
So, just to finish, my non-pensions highlight of the month has been a relatively new comedy that is available on Channel 4's All 4. It is called Feel Good, and I think that most people could use any excuse to feel good at the moment, and stars Canadian comedian Mae Martin as she tries to control the addictive behaviours and intense romanticism that permeate her life. It is a great watch made all the more compelling by a star turn from Lisa Kudrow as Mae's mother.
Thanks for listening and, until next time, I hope you have a great month in pensions.