- The calm before the pensions deluge
- Norton – the Regulator sets out its stall
- PPF says that it stands ready to onboard DB schemes into a public sector consolidator
- HMRC’s scheme returns may become more widespread and more detailed
- Venture Capital Investment Compact launched
- LTAFs – FCA decides to retain FSCS coverage
The calm before the pensions deluge
Parliament was prorogued on 26 October 2023, to return on 7 November 2023 with the first King’s Speech for over 70 years due to take place, preceded by all the pomp and ceremony. But unless there is a major surprise and a Pensions Bill is announced, it will likely not be until Jeremy Hunt delivers the Autumn Statement on 22 November 2023 that we will have set out in clearer view what the Government intends to deliver in relation to pensions in the last 12 months or so before a General Election has to be held.
It appears that Pensions Minister Laura Trott is getting ready to launch another of her trademark pension regulatory tsunamis, which could include some next steps in all of the following – auto-enrolment to improve contribution adequacy, DC value for money, the default consolidator idea for small DC pots, DC decumulation, and some DB initiatives, all potentially wrapped up in a delivery roadmap.
Meanwhile, Nausica Delfas, the Chief Executive of the Pensions Regulator, has said, in a wide-ranging speech, that the Regulator is evolving its regulatory approach to help shape the market towards fewer, larger, well-run schemes capable of investing in a diverse range of assets, implying that the Government is likely to push forward with a consolidation agenda. She also promised the following:
- New guidance on investing in private markets by the end of 2023, with existing investment guidance for DB and DC schemes being updated in due course
- The new DB funding code will clarify that there are no limitations on what constitutes suitable assets in which to invest, and all schemes can invest in growth assets, with much greater flexibility for open schemes and those further away from their end game. It is not clear how this ties up with what we understand to be current DWP thinking for the low dependency investment allocation when DB schemes reach significant maturity
- Expecting schemes of all types to not only disclose ever more information, but to also analyse, interpret and act to spot and mitigate risks before they materialise. It is not clear what is meant by this, but it may possibly be linked to last autumn’s LDI crisis
- Instead of the previous approach to guide schemes and employers towards compliance, the Regulator will be more assertive going forward by taking regulatory actions and using its powers to ensure compliance
The Regulator is also set to launch its new digital and data strategy outlining its future transformation. This appears to be linked to the earlier setting up of a data, digital and technology directorate within the Regulator, as mentioned in the Regulator’s 2023/24 corporate plan published in April 2023. However, it seems that we need to await the launch to find out what exactly is to change.
Comment
It has been very quiet on the pensions regulatory front in recent weeks, with things that could have been delivered not happening (such as the much-delayed General Code). This may all be about to change, even if it amounts to no more than a ‘direction of travel’ given that legislative time is running out for this Government.
Norton – the Regulator sets out its stall
Some 18 months after Stuart Garner, the former owner of Norton Motorcycles, was handed a suspended prison sentence in relation to breaching the employer-related investment pensions legislation (see Pensions Bulletin 2022/13), the Pensions Regulator has published its report into the actions that it took in this case.
The report shows that four years elapsed between the Regulator first being alerted to concerns that touched on Mr Garner’s activities until it launched an investigation, and another five years before Mr Garner was convicted in 2022. The report also sets out the various agencies that the Regulator worked with over this time, which included two police forces, the Pensions Ombudsman and the Fraud Compensation Fund. On the last of these the Regulator reports that the FCF has decided in principle that it considers there are reasonable grounds for believing that there has been dishonesty, as required for the Fund to make compensatory payments into the schemes. An independent trustee has also been appointed to work with the scheme members and the FCF.
The Regulator says that the nature and complexity of the case meant a multi-agency approach was essential, and that this case demonstrates the importance of working together.
The Regulator has also announced that it has now prohibited Mr Garner from ever acting as a trustee again, following a finding in August 2023 by its Determinations Panel that he was not a fit and proper person to be a trustee as he lacked the integrity, competence and capability to hold such a position.
Comment
This report puts into the public domain a useful outline of the case and how various agencies acted together, slowly but ultimately successfully, to bring Mr Garner to book.
The report was published on the same day the House of Commons Work and Pensions Committee closed its call for evidence into this case (see Pensions Bulletin 2023/30). And so, it is now over to the MPs to make progress on their inquiry, to establish whether lessons can be learned, including if there is scope to streamline and speed up future cases.
PPF says that it stands ready to onboard DB schemes into a public sector consolidator
A blog, by Sara Protheroe, Chief Customer Officer of the Pension Protection Fund, sets out some thoughts about how the PPF could go about becoming a consolidator of DB pension schemes, likely at the smaller end, in order to support the Government’s productive finance agenda and improve outcomes for members.
She says that the PPF’s successful track record of taking on underfunded schemes of failed scheme sponsors in a timely manner provides evidence that it could swiftly onboard schemes of continuing employers, once initial conditions had been met, into an entirely separate consolidator fund. There would also be the opportunity to do certain things differently from the PPF and in this respect, she points to the possibility of the assets going over at an earlier stage in the process than with the PPF, with the administration following later. Such an assets-first approach would be in keeping with the Government’s desire for more pension scheme investment to be directed to productive finance as swiftly as possible.
Comment
There is a lot more to the PPF acting as a consolidator than can possibly be covered in a blog. One aspect that the PPF will have to consider, should it be asked to take on this role, is how it can administer schemes with a potentially huge variety of benefit designs – something that it has not had to address when setting up ‘standard’ PPF compensation to former members of failed schemes.
HMRC’s scheme returns may become more widespread and more detailed
HMRC’s October 2023 pension schemes newsletter has three topics, namely the latest pension flexibility statistics, registration statistics and some news on the Managing Pension Schemes service.
On the last of these, first there is a reminder that the service can be used to create, compile and view event reports in-year, for the 2023/24 tax year onwards (this was launched in September and trailed in the June 2023 edition – see Pensions Bulletin 2023/27). The Event report is a key document which all schemes need to complete on an annual basis unless it is a nil return. Once more there are details around how to migrate to the new system for those who have yet to do so.
There is also some more information about using the new service to submit an HMRC pension scheme return for the 2023/24 tax year onwards, which again was trailed in June 2023. HMRC says that to ensure compliance with the Finance Act 2004, they will be asking for more information on this return than was requested under the old service and more schemes will be asked to complete a return. There will still be two types of return – a standard return and another for SIPPs – and details that will be needed under each are spelt out. More information on the scheme return is promised in future newsletters.
Comment
Registered pension schemes are required to submit a return relating to a tax year only if requested by HMRC and they normally have until 31 January following the end of the tax year to which the return relates. So, it will be a while before the new system is up and running, with submissions for 2023/24 not needed until 31 January 2025.
Venture Capital Investment Compact launched
The British Private Equity and Venture Capital Association has launched the “Venture Capital Investment Compact” under which signatories drawn from UK venture capital and growth equity fund managers are to “to develop a long-term and constructive working relationship with UK pension investors”.
Over the next 12 months the signatories will work with pension providers to “increase UK pension scheme investment into venture, growth and other private capital funds as part of a diversified portfolio”. Specifically, “alongside the supportive actions of Government…” the signatories commit to:
- Attract UK pension funds as limited partners into the funds they manage or advise
- Partner with pension investors to consider how they can produce effective investment structures to suit their needs to allow allocations to funds in the interest of savers
- Share best practice and rules of engagement for working in private markets with DC schemes, particularly trustees and their advisers
This initiative is intended to build on the Mansion House Compact of July 2023 (see Pensions Bulletin 2023/28) which saw nine of the UK’s largest DC pension providers commit to the objective of allocating at least 5% of their default funds to unlisted equities by 2030.
LTAFs – FCA decides to retain FSCS coverage
The Financial Conduct Authority has decided not to take forward proposals from earlier this summer (see Pensions Bulletin 2023/27) that would have excluded regulated activities relating to Long-Term Asset Funds (LTAFs) from coverage under the Financial Services Compensation Scheme (FSCS).
The FCA’s feedback statement makes clear that nearly all respondents expressed significant concern about the proposed removal of FSCS protection for activities linked to LTAFs unless the scope of FSCS protection was considered more widely as part of a holistic review. As a result of this feedback the FCA has stated that it intends to “consider any changes to the scope of FSCS protection for retail investments in the round, rather than excluding activities relating to certain investment products in isolation”.
Comment
We responded to the FCA’s consultation stating that we did not believe it was appropriate to be considering the removal of FSCS protection from a new product and therefore support the FCA’s conclusions.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
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