Pensions bulletins – 2 / 7 观点
In the latest edition of our Taylor Wessing Pensions Bulletin we give a snapshot of the latest pensions developments below.
Please get in touch with your usual Taylor Wessing pensions contact if you would like to discuss anything you have seen in the Bulletin.
In a recent blog TPR has said that it is building relationships with administrators to better understand the challenges and risks they face. It has said it wants to understand what makes for good and poor administration and to be able to respond when issues materialise, and to this end it is currently engaging with administrators representing around 10% of the market.
This development is not a surprise. Administration is a core function, and good quality administration is essential to the safeguarding of scheme data and assets and ultimately to the provision of the right benefits to the right people. In light of the current pensions landscape, with trustees considering end-game scenarios, the threat from cyber-crime increasing, and the forthcoming dashboards programme which will require schemes to have good quality data, trustees may also consider it appropriate to review and if necessary update the terms of or improve the administration arrangements they have in place.
Possible pension scheme implications
(TNFD) has finalised its recommendations on a disclosure framework in relation to nature-related issues, aimed at treating "nature risk" in a similar way to financial, operational and climate risk. The recommendations are along the same lines as those previously made by the Taskforce for Climate-related Financial Disclosures (TCFD), covering four areas: governance, strategy used to manage nature-related issues, risk and impact management, and use of metrics and targets for assessment purposes. TCFD-style disclosures are now mandatory for larger pension schemes and may, over time, become the norm for all UK occupational pension schemes, but some schemes were early adopters, reporting along the lines recommended by the TCFD on a voluntary basis from the start. The Government is to examine in the next few months how the TNFD recommendations might be incorporated in the UK, but there is as yet no clarity on whether they might become mandatory for pension schemes in the same way as TCFD. For now, as nature-related risks are increasingly recognised to have the potential to amount to financial risks, trustees may wish to consider whether they ought to be taking additional steps in this area, including the possibility of applying some or all of these recommendations on a voluntary basis.
Two significant pension decisions that were delivered a few months ago are being appealed – the outcome of which will be much anticipated because of the possible impact on scheme amendments. In the Virgin Media case (see our previous report on this here), the decision as it currently stands means that certain amendments to schemes that were contracted out on a reference scheme basis are void if an actuary's certificate under s37 of the Pension Schemes Act 1993 was not obtained before the amendment was made. The recent BBC case also means that schemes that have an amendment power like that in the BBC Pension Scheme will likely have only a very limited ability to make changes to future service benefits (though the latter will have much more limited practical implications than the Virgin Media decision).
We have written previously on TPR's General Code, which consolidates a number of TPR's existing codes and introduces new elements such as the requirement for certain schemes to have an 'effective system of governance' and to carry out 'own risk assessments'. TPR has now suggested that the code is in final form and ready to go before Parliament, following which (after it has been laid for 40 days) it will come into effect. Trustees should be aware that the requirements of the General Code are expected to apply immediately on it coming into effect and so, to the extent that a scheme's governance falls short of what is required, now is the time to identify and address those gaps.
TPR has amended its guidance on regulated apportionment arrangements (RAAs) to give more detail as to the circumstances in which such an arrangement might be approved. A RAA is an arrangement by which an employer facing inevitable insolvency can detach itself from an underfunded defined benefit pension scheme, allowing the employer to continue to trade, and the scheme to ultimately enter the Pension Protection Fund (PPF). These arrangements require the consent of the pension scheme trustees, TPR and for the PPF to not object, and TPR and the PPF both have previous published guidance setting out the circumstances in which they might agree to such an arrangement. The issues in these scenarios can be very complex and specialist advice should be sought to ensure all angles are covered.