Pensions: what’s new this week February 2022 | Allen & Overy LLP
Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.
This week we cover topics such as: dashboard developments; “Race up”: focus on investment in pension schemes; TPR: Climate Adaptation Report; Carbon emissions data model; PPF Levy Ceiling Order 2022/23; End of EU offset exemption; TPO launches Pension Dishonesty Unit; New documents for transferring data out of the UK.
- Dashboard evolutions
- “Upgrade”: focus on pension plan investing
- TPR: Climate Adaptation Report
- Carbon Emissions Data Model
- PPF Levy Ceiling Order 2022/23
- End of EU offset exemption
- TPO launches Pension Dishonesty Unit
- New documents for transferring data out of the UK
The Department for Work and Pensions (DWP) has published a consultation on draft indicative regulations governing pension scorecards. The regulation sets requirements for occupational pension schemes working with dashboards, as well as for the dashboards themselves. The consultation ends on March 13, 2022. The Financial Conduct Authority (FCA) will consult on parallel proposals for personal pension providers in the coming weeks.
The proposals envision a “find and display” feature, despite “very real concerns” about the feasibility of this approach. It is intended that users will be able to find their pensions and view information about them, including their accrued and projected values. The consultation clarifies how pension schemes will be expected to provide the information needed to facilitate this. The government may in the future seek to include modeling tools and explore the possibility of facilitating member-initiated transfers or consolidation.
Connecting to the digital dashboard architecture will be staggered, with large patterns (at least 1,000 active/deferred members) required to connect between April 2023 and September 2024 and medium patterns (100-999 active/deferred members) ) between October 2024 and October 2025 Small and micro-schemes (less than 100 active/deferred members) are not covered but should be set up from 2026.
The regulations include “ambitious” data requirements for pension schemes to protect consumers. The consultation also includes a reminder that plans should improve the accuracy of their data.
The Pensions Regulator (TPR) would have the ability to impose penalties of up to £5,000 on individuals and up to £50,000 otherwise, for any instances of non-compliance. This applies on a “per request” basis, so a penalty may be imposed for each individual failure to comply with a person’s request for information.
The regulations give the Pensions Dashboards Program (PDP) the authority to set mandatory standards with respect to dashboard requirements. Along with the consultation, the PDP has released information on the scope of these standards and how they will go about defining them.
“Upgrade”: focus on pension plan investing
The government has published its white paper on the “race to the top of the United Kingdom”. On pensions, the white paper focuses on pension funds as a source of investment to support leveling efforts in infrastructure, housing, regeneration and SME financing. To facilitate this, the government intends to remove the costs and barriers to making long-term illiquid investments. He highlighted recent consultation on proposals to remove certain performance fees from the scope of the load cap that applies to default arrangements in DC schemes, noting that a response is expected in the months to to come.
TPR: Climate Adaptation Report
TPR has published a Climate Adaptation Report outlining the most relevant climate change risks to occupational pension schemes and the approaches it is taking to address them, both as a regulator and as a provider. ‘organization. TPR believes that too few systems pay adequate attention to climate-related risks and opportunities. With respect to DB schemes, TPR notes that ownership of stewardship policies is limited and recommends trustees subscribe to the UK Stewardship Code 2020. It states that DB trustees should understand how climate-related risks and opportunities affect commitments employers and include climate change in their integrated risk management framework.
Carbon Emissions Data Model
The Pensions and Lifetime Savings Association, the Association of British Insurers and the Investment Association have published a template to help schemes collect emissions data. The model is intended to provide a functional description of the data necessary for emission measurement reporting systems, in accordance with the requirements of the TCFD. The group will review implementation experiences, additional measures, the most recent regulatory developments and emerging best practices during the second quarter of 2022.
PPF Levy Ceiling Order 2022/23
The latest Pension Protection Fund (PPF) order sets the levy cap at £1,178,605,581 for the year commencing 1 April 2022. This is a 7.2% increase on the year, reflecting the increase in the general level of income. Previous orders have set a cap on compensation, but this is no longer included since the Court of Appeal found in PPF vs. Hughes that the compensation cap was age discriminatory and contrary to EU law.
End of EU offset exemption
The European Securities and Markets Authority (ESMA) has published a letter recommending that European pension schemes should be subject to clearing requirements for OTC derivatives. These devices are currently exempt from the requirements, but ESMA advises ending this exemption, as it believes that pension schemes are now broadly operationally ready to meet the requirements. ESMA has proposed a final extension of the exemption, until June 19, 2023, to give schemes time to prepare. The equivalent UK exemption is due to expire on June 18, 2023 (but could be extended).
TPO launches Pension Dishonesty Unit
The Pensions Ombudsman (TPO) has set up a Pilot Pension Dishonesty Unit to investigate allegations of serious breach of trust, embezzlement of pension funds and dishonest or fraudulent behavior by scheme administrators of retirement. The main objective of the Pension Dishonesty Unit is to “hold wrongdoers accountable for the illegal gains they have made and to ensure that they repay these monies to scheme members”.
New documents for transferring data out of the UK
The Secretary of State has tabled documents in Parliament for use when transferring personal data outside the UK, to comply with data protection requirements. These documents are the International Data Transfer Agreement, the International Data Transfer Addendum to the European Commission’s Standard Contractual Clauses for International Data Transfers and a document setting out transitional arrangements. The ICO has confirmed that these documents are of immediate use to organizations transferring personal data outside the UK, subject to them coming into force on 21 March 2022 and awaiting parliamentary approval. The ICO has also updated its guidance on what constitutes a restricted transfer (transfers to organizations outside the UK).