The Month In Pensions – November 2020 – Are you ready for cyber scams?
Ian Chapman-Curry: Hello, and welcome to the Month In Pensions for November 2020, brought to you by the pensions team at Gowling WLG.
I'm Ian Chapman-Curry and I'll be looking at one of the themes that has excited the pensions industry in November before taking you through the key points of this month's main legal and policy pensions developments.
I'll then be joined by Charlotte Scholes, a principal associate in our specialist pension disputes team, to discuss the latest in GMP equalisation with the third judgment on Lloyds.
We'll then take a look at what is coming down the tracks for the industry in December 2020.
Before we start, just a quick reminder that you can find out more about the pensions team at Gowling WLG and get all of our pensions Insights.
Theme for November 2020 – Are you ready for cyber scams?
This month saw the pensions industry focus on two related and increasingly intertwined areas. The Pensions Regulator (TPR) is calling on the pensions industry to sign up to its pledge to combat pension scams and the Pensions Administration Standards Association (PASA) has issued guidance on cyber crime. Both are timely interventions. COVID-19 has resulted in a spike of pension scams, with some members desperate to access their pension savings and criminals waiting to take advantage. Cyber crime is on the rise across the financial services sector and the pensions industry is no exception.
Earlier this year, a pensions administrator was subject to a ransomware attack which it managed to foil. A Finnish company that runs psychotherapy clinics across Finland was not so lucky. In this case, hackers stole 40,000 patient records. The attackers first attempted to hold the company to ransom. When this was unsuccessful, they went after the individual patients (demanding €200 in bitcoin which rose to €500 after 24 hours). Pension schemes hold a large amount of personal and sensitive personal data which could be incredibly valuable for pension scammers and cyber criminals. Trustees should make sure that they and their administrators stay on top of this constantly evolving issue.
This month's main developments
TPR asks trustees to pledge to combat scams
TPR is asking pension scheme trustees, providers and administrators to sign up to a pledge to combat pensions scams. The Pension Scams Industry Group (PSIG) has participated in the development of the pledge. The pledge comes at a time when pension scams are receiving significant political and press coverage. The pledge can be made via TPR's website, by clicking on the 'make the pledge' link. Those making the pledge can then self-certify they have taken action and promise to abide by the pledge principles.
PASA issues cyber crime guidance
PASA has issued guidance on cyber crime. The guidance provides background to, and guidance on, the topic of cyber crime as it applies to pensions administrators. It also sets the scene for the strengthening of the PASA Standards in the near future.
DWP publishes statement of policy intent for guidance 'nudge'
The DWP has published a statement of policy intent on its plans for schemes to provide a 'stronger nudge' towards pensions guidance. This will apply to members (or other relevant beneficiaries) looking to access defined contribution benefits through pensions freedoms. Amongst the measures that will be set out in regulations are presenting taking guidance as a normal part of the process of accessing pension savings. Trustees will also be required to incorporate booking a pensions guidance appointment as part of their member engagement process. Finally, trustees will need to ensure that the member has either received appropriate guidance or has opted out and keeps records of this.
TPR publishes new trustee guidance on sponsoring employer distress
TPR issued new guidance for trustees of DB schemes on 12 November 2020, seeking to help trustees protect their schemes in the event of sponsoring employer distress. TPR emphasises the importance and role of integrated risk management (IRM), and expects trustees to have workable contingency plans and suitable triggers in place. TPR also expects trustees to act quickly to protect savers if they spot signs of employer distress or insolvency.
Given the backdrop of COVID-19 and the resulting economic consequences, trustees are also reminded to actively monitor their employers' financial health and to watch out for warning signs of distress. The guidance highlights areas which might indicate the weakening strength of the sponsor's covenant (e.g. loss of a key customer or restructuring or corporate activity leading to a sale of assets). It also provides examples of possible outcomes and what trustees might consider doing to safeguard scheme members. Trustees are also reminded to prepare for any issues arising from Brexit.
Pension Schemes Bill 2019-21 clears the House of Commons
On 16 November 2020, the Pension Schemes Bill 2019-21 had its report stage and third reading in the House of Commons. During the report stage a number of amendments were debated and then either not put to a vote at all or voted on and rejected. These related to pensions guidance, pension transfers, DB funding and climate change risk. The Bill will now return to the House of Lords for consideration of the Commons amendments, although no date has yet been set.
Coronavirus Job Retention Scheme extended
The Coronavirus Job Retention Scheme, originally due to end on 31 October 2020, has been extended to 31 March 2021. The Job Support Scheme, which was due to start on 1 November 2020, has been postponed. The Job Retention Bonus will no longer be paid in February 2021, though a retention incentive may be deployed at a future date.
High Court rules on trustee obligations on GMP equalisation and transfers out
The High Court has handed down the third judgment in the Lloyds GMP equalisation series (Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank PLC & Ors [2020] EWCh 3135 (Ch) (20 November 2020) (the Judgment). The Judgment focuses on cases where:
- a member of one of the Lloyds' schemes had transferred out of a Lloyds' scheme; and
- the trustee of the Lloyds' schemes had made a transfer payment to a receiving scheme.
The most detailed points from the Judgment covered statutory cash equivalent transfers. The Judgment stated that the trustee of the Lloyds schemes remains liable to the transferring member for its breach of duty to make a transfer payment which was correctly calculated and which reflected the member's right to equalised benefits. This liability was not discharged by statute, the rules of the scheme or by any agreement with the transferring member.
The Judgment also covered bulk transfers (ruling that the transferring members are entitled to benefits under the receiving scheme and are no longer entitled to benefits under the transferring scheme) and individual, non-statutory transfers (where the judge held that the transferring member no longer has rights under the transferring scheme unless the court sets aside the exercise of the power and the member can require the trustee to exercise the power afresh).
December 2020 in pensions
- 24 - 28 December 2020 - Courts and tribunals close for the Christmas break.
- 31 December 2020 - End of the transition period (also referred to as the implementation period) following the UK's withdrawal from the European Union.
Subscribing to The Month In Pensions
And that is nearly all from The Month In Pensions for November 2020. We always finish off with a non-pensions recommendation - something a little lighter than reading all 55,000 words of the latest Lloyds judgment.
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 and you can get more from the pensions team on our webpage.
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.