How the Regulator will police DB 'superfunds' (for now)

The Pensions Regulator has updated its interim guidance on the supervision of commercial consolidation vehicles (‘superfunds’) for defined benefit (DB) pension schemes. It describes the policies that the Regulator will follow and its expectations for how superfunds should operate prior to the introduction of tailored legislation. It is addressed primarily to superfunds themselves, to establish the governance, administrative and funding standards that they will be held to pending the passing of primary legislation.

The Regulator also published details of a consultation exercise that it conducted with interested parties whilst compiling the revised guidance.

Default fund charge cap review

The Department for Work and Pensions (DWP) has published a ‘call for evidence’ seeking views on the effectiveness of defined contribution (DC) default fund charges and transparency measures in protecting member outcomes.

In April 2015, the Government introduced a charge cap on the default funds of DC schemes used for automatic enrolment. The cap was set at 0.75 per cent of the member’s rights in the fund. Following a review in 2017, the charge cap was found to be working as intended and left unchanged, however, the DWP committed to a further review of the cap in 2020.

Tax relief administration: Call for Evidence

Her Majesty's Treasury has published a Call for Evidence (CfE) in which it seeks to gather evidence on improvements that could be made to the administration of pensions tax relief. Specifically, it is concerned with the anomaly that results in low earners (whose income is under the personal income tax allowance so that they pay no income tax) receiving less generous tax treatment if contributions to their schemes are made under net pay arrangements. The Treasury has explored four approaches to address the anomaly but acknowledges that, ‘to date a proportionate and straightforward solution to address the difference in treatment has not been found’.

Public-sector pensions update

There has been a flurry of significant announcements concerning the public-service pension schemes. In this article we give brief summaries of each development including: McCloud; Cost-control measures; Exit payments; and Survivors’ benefits.

Pension Regulator’s Corporate Plan

The Pensions Regulator has published its Corporate Plan for the year 2020/21. The Regulator notes that the COVID-19 pandemic has required it to revise its plans for the coming year and adapt its priorities, however, protecting pension scheme members remains its focus.

Viral news

On 30 June 2020 the Pensions Regulator updated the section in its DC scheme management and investment: COVID-19 guidance for trustees on the implications of diverting contributions away from ‘gated’ (temporarily closed) funds. The issue was originally whether by doing so trustees might inadvertently create 'default arrangements', triggering charge-capping and the requirement for a default-specific statement of investment principles, where the scheme is used for automatic enrolment. The Regulator suggested that default arrangements would be the outcome unless members were made aware before they selected the original fund (the one that was gated) that contributions could be diverted in some circumstances, or they consented to the diversion. In the updated version the Regulator also raises the question of whether, once the gated funds re-open, the act of re-directing contributions back to the original investment choice could perhaps make that fund a default arrangement. Again, prior consent or advance warning are discussed as measures that might prevent the inadvertent establishment of a default arrangement.

HMRC newsletters July 2020

During July 2020, Her Majesty’s Revenue and Customs (HMRC) published new editions of its Pension Schemes Newsletter, Managing Pension Schemes Newsletter, and Guaranteed Minimum Pensions (GMP) Equalisation Newsletter (the latter is discussed in our GMP Equalisation Update article).