Pensions Weekly Update – 28 October 2020

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Here is our brief weekly summary of key legal and regulatory developments relevant to occupational pension schemes, which you might have missed, with links for further information.

The Pensions Regulator (TPR) has published guidance for trustees and employers who are considering a transfer to a defined benefit superfund (or other similar model). As part of the process, trustees will be required to demonstrate to TPR that, having explored other options, they consider that a transfer to a superfund would be in the best interests of the members and would improve the likelihood of members’ benefits being met in full. Trustees should be satisfied that the scheme cannot afford to buy out benefits with an insurer now and has no realistic prospect of affording buyout in the “foreseeable future” (broadly, within five years, but assessed on a scheme-specific basis). Legal, actuarial and covenant advice will be integral to the trustees’ decision-making process. Sponsoring employers will be expected to apply to TPR for clearance. TPR expects to be involved at an early stage and will operate a hands-on approach to overseeing transactions (but note that TPR has not yet completed its assessment of superfunds that are able to accept a transfer).
The Association of Professional Pension Trustees (APPT) has launched its Code of Practice for Professional Corporate Sole Trustees. While the code is intended for members of the APPT, TPR is likely to expect all sole corporate trustees (with certain exceptions) to follow the principles of the code. It expands upon the standards for professional trustees, which the APPT issued last year and includes a requirement for sole corporate trustees to provide assurance reporting on internal controls in accordance with ICAEW Relevant Trustee Supplement AAF 02/07 (TECH 04/13AAF). The Code also recommends that sole corporate trustees consider whether it would be helpful for employers to have this code drawn to their attention.
On 22 October, the Chancellor announced how the new Job Support Scheme (JSS) would operate from 1 November, and confirmed the scheme had been altered to provide additional support. The main features of the JSS are described in a policy paper, and are summarised in this guide prepared by our Labour & Employment colleagues. The JSS grant will not cover National Insurance contributions or pension contributions. Employer and employee contributions will remain payable in accordance with the terms of the pension scheme (unless the employee has opted out or stopped saving into their pension). Employers will be able to top up employee wages above the minimum levels set by the JSS. We recommend that employers and pension scheme trustees review pension scheme rules and employment contracts to verify how contributions and benefits will be calculated for employees in respect of whom the JSS is used. They should also check for unintended consequences triggered, for example, by temporary absence rules.

If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.