Pensions top picks: some recent and expected developments

Highlighting five significant legal and regulatory developments which may be relevant to your charity’s pension arrangements and future plans.

As employers, charities are obliged to provide their employees with access to pension arrangements and to pay employer contributions to these. Charities may meet their obligations by participating in a variety of different arrangements including contract based group personal pension plans, occupational pension schemes and / or public sector pension schemes, including the Local Government Pension Scheme. Helen Woodford, a senior solicitor in our Pensions Team, flags five noteworthy pensions developments for charities to be aware of:

1. Auto-enrolment

In early summer, the Pensions Regulator (TPR) issued a press release confirming that employers suspected of failing to meet their workplace pensions duties could be targeted with spot check inspections. The focus will be on employers who have failed to make correct pensions contributions for their employees.

Routine compliance drives had been halted during the Covid pandemic, but the statement confirms they are now back on track.
Alongside conducting spot check inspections, TPR also detects non-compliance using data shared by HMRC, alerts from pension schemes, whistleblowing reports from individuals, and other information and intelligence.

TPR’s Head of Compliance and Enforcement Joe Turner says: “Where an employer fails to meet their automatic enrolment duties, our priority is to make sure they become compliant. We use our wide-ranging powers to do so, including issuing financial penalties where appropriate.”

In other auto-enrolment news, legislation to reduce the lower age threshold for auto-enrolment from 22 to 18 and to remove the lower end of the qualifying earnings band is expected to be considered by Parliament in late October.

2. Pensions dashboards

The framework for the introduction of pensions dashboards was legislated for in the Pension Schemes Act 2021.

A pensions dashboard is a digital platform that will provide access to information about an individual’s pension savings. Dashboards will help individuals plan for retirement by:

• finding their various pensions and reconnecting them with any lost pension “pots”; and
• providing information about the value of their pensions in terms of an estimated retirement income.

Pension scheme trustees and administrators will be required to register their pension scheme with the first non-commercial pensions dashboard, operated by The Money and Pensions Service (MaPS), by a specific staging date. Advance work needs to be undertaken to ensure that by the relevant staging date, pension schemes will be able to:

• receive personal information on members, and search and match members to their pensions; and
• provide members with information about their pension through the dashboard.

Staging dates are expected to be from Spring/Summer 2023 through to 2026 and will be determined by the type and size of the scheme (with the largest schemes reaching their staging date first).

Employers should identify the staging date for their pension scheme and familiarise themselves with the dashboard system as employees and former employees first port of call for enquiries may well be their employer.

Further legislation regarding pensions dashboards is expected but, in the meantime, guidance is available on TPR’s website and on the Pensions Dashboards Programme website (operated by MaPS).

3. Funding of defined benefit (DB) occupational pension schemes

Towards the end of July the DWP launched a consultation on Regulations to boost protections for DB scheme members. The consultation will run until 17 October this year.

The Pension Schemes Act 2021 introduced the framework for the draft Regulations which would require DB schemes to have long-term plans set out in a funding and investment strategy, with these plans also to be submitted to TPR (with the intention of enabling TPR to intervene more efficiently to protect members when needed).

TPR is also due to consult on a new DB Funding Code of Practice in the autumn and will take into account the draft Regulations when doing so.

4. TPR blog explains expectations of DB occupational pension scheme employers and trustees on employer refinancing

In this blog (available on TPR’s website) TPR notes that employer refinancing may be more prevalent in the current economic environment and sets out its views on the risks of refinancing to the ability of employers to meet their obligations to their schemes and the actions pension scheme trustees and employers should take to make sure members’ benefits are protected (by putting in place appropriate mitigation measures where necessary, for example by making additional cash payments to the scheme if viable or by implementing security or guarantees for the benefit of the scheme). Early sharing of information on refinancing proposals between employers and trustees is encouraged.

5. Local Government Pension Scheme (LGPS) – Regulations implementing the ‘McCloud’ remedy

The Ministry of Housing, Communities and Local Government ran a consultation from July to October 2020 in which it proposed to extend underpin protection to younger qualifying members of the LGPS with the intention of removing the unlawful age discrimination identified by the Court of Appeal in the 2018 ‘McCloud’ judgement.

In early 2021, responding to the consultation, the Government confirmed that all LGPS members would accrue benefits on a career average basis, without underpin protection, from April 2022.

The LGPS changes are expected to be enacted in Regulations coming into force in October 2023, with retrospective effect from 1 April 2014 in England and Wales and 1 April 2015 in Scotland and Northern Ireland. Prior to this, there is expected to be a further Government response to the consultation “later this year” accompanied by an updated version of the draft Regulations. There will then be another period of consultation before the Regulations are finalised.

In order to implement the remedy set out in the Regulations, pension schemes may find they do not hold sufficient data and may need contact employers to fill any gaps.

Similar remedies are also being implemented in legislation in relation to the other public sector pension schemes.