- Pensions Regulator issues guidance to trustees on Ukraine conflict
- Stronger nudge – Regulator updates its guidance as MPs debate the issue
- Scottish Parliament to consider gender recognition reform
- Pensions dashboard – occupational pension schemes consultation closure date looms
Pensions Regulator issues guidance to trustees on Ukraine conflict
The Pensions Regulator has issued a short guidance note that covers a number of issues, relevant to trustees of occupational pension schemes, that have come into focus as a result of Russia’s invasion of Ukraine.
Noting at first the resultant volatility in investment markets, the Regulator expects trustees to be vigilant and talk to advisers about any action that may need to be taken, depending on the scheme’s investment, risk management or employer covenant exposures. The Regulator also says that trustees should take steps to consider any action that may need to be taken, including in relation to investments, to align with sanctions announced by the Government.
There then follows a list of six areas the Regulator expects trustees to consider – including heightened risks of cyber-attacks and financial crime (including scams) – before the guidance wraps up with warnings of the importance of having regard to the longer term when making trustee decisions and to consider whether to let members know what the trustees are doing and to urge members not to rush their own decisions.
The Regulator would also like to hear about any significant issues or challenges that individual trustee boards or their sponsoring employers are facing as a result of the ongoing conflict.
The Pension Protection Fund has also issued a statement in which it says that its investment exposure to Russia, which it had been reducing in light of the growing instability and risks in the region, is negligible, but it recognises that the recent volatility in financial markets could have wider impacts, including potentially on some of the DB schemes it protects.
Comment
The Regulator’s guidance is written in a generic style and whilst it is useful as far as it goes, it is difficult for the Regulator to be more specific in what is a fast-moving situation. The risks are also likely to vary between schemes. Whilst for many, investment volatility will be uppermost in trustees’ minds, for some, there could be material employer covenant exposures. As for scheme members, it is too early to know whether armed conflict in Europe will provide a backdrop for more pension scams to be inflicted.
Stronger nudge – Regulator updates its guidance as MPs debate the issue
The Pensions Regulator has updated one of its six guides to support DC trustees in meeting the Regulator’s Code of Practice 13. The main driver for this update is to reflect the ‘stronger nudge’ to take guidance from Pension Wise, regulations for which come into force on 1 June 2022 (see Pensions Bulletin 2022/02).
Communicating and reporting: DC schemes has had its “at retirement communications” section updated on two counts. It now contains the new stronger nudge requirements (see the section headed “Directing members to Pension Wise guidance” and the subsections that follow). It also now contains pension flexibilities information migrated from a guide that had been issued in April 2015 and which now appears to have been withdrawn.
In respect of the stronger nudge requirements the guidance builds on the regulations, suggesting, amongst other things, the following:
- It is good practice to offer to book a Pension Wise appointment as early as possible in the process
- The telephone number for Pension Wise (yet to be confirmed) and web address should be provided so the affected member can contact them directly for an appointment if they prefer
There is also mention of the Pension Wise booking tool, which will be available soon.
Appendix 2, which sets out example declaration wording that could be used in retirement documentation for completion by members, has also been updated to reflect the stronger nudge requirements.
Coincidentally, on 1 March 2022, MPs debated pensions guidance and advice, with calls from some for a trial of automatic (as opposed to nudged) Pension Wise appointments, amidst concern that very few of those about to make DC decumulation decisions are receiving assistance from Pension Wise and the stronger nudge requirements are likely to make only a small difference.
Comment
This updated guidance delivers on the promise made by the Regulator at the time the regulations were settled in January. DC schemes will be making urgent changes to their retirement processes in the light of these regulations and the early delivery of this guidance may assist.
As to whether the stronger nudge will result in significantly more DC savers receiving guidance or advice before they decide how to access their retirement savings, this remains to be seen, but the estimates referenced in Parliament are not encouraging.
Scottish Parliament to consider gender recognition reform
A Bill was introduced to the Scottish Parliament on 2 March 2022 that will make it easier for transgender people who either had their birth registered in Scotland or are resident in Scotland to obtain a gender recognition certificate.
The Gender Recognition Reform (Scotland) Bill reforms the UK-wide Gender Recognition Act 2004, but only in respect of individuals in the categories above. The key change is that it will not be necessary to provide evidence by means of a medical report that the individual has or has had gender dysphoria. Instead, the individual, who must be aged at least 16, has to declare that they have lived in the acquired gender for the last three months, intends to continue to do so permanently and completes a three month period of reflection.
Obtaining a gender recognition certificate anywhere in the UK has potential implications for pension benefits, but likely limited to older individuals where there are or could be sex-based differences, such as in respect of GMPs and pre-17 May 1990 pensionable service. However, the impact could be more widespread where sex-based actuarial factors are used to change the form of scheme benefits, or to determine transfer values.
Comment
Although pensions are not mentioned in the Bill, should it pass into law, more pension schemes may find that they need to deal sensitively with the benefit consequences of one of their members obtaining a certificate.
Pensions dashboard – occupational pension schemes consultation closure date looms
Consultation on the DWP’s indicative regulations setting out important detail on the operation of pensions dashboards, including the obligations being put on occupational pension schemes to connect to and supply information to enquirers via them, is due to close on 13 March 2022.
Many responses are expected and the DWP will have its work cut out if it is to be able to finalise these regulations by the autumn and in so doing keep the rollout on track. LCP’s response highlights the need for dashboards to have more functionality than is currently proposed in order for them assist consumers, pointing out some of the risks that could crystallise if consumers go elsewhere to use the information provided.
Comment
For further details of the DWP’s consultation see our News Alert that accompanied Pensions Bulletin 2022/04. If you’re interested in the state of play with pensions dashboards and wider pension policy issues, LCP partner Sir Steve Webb spoke with Chris Curry, Principal of the Pensions Dashboards Programme and Director of the Pensions Policy Institute (PPI), on 3 March 2022.
