Pensions Weekly Update – 19 January 2022

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

The Department for Work and Pensions (DWP) has issued its response to consultation and regulations on the “stronger nudge” to pensions guidance. The new rules will come into force on 1 June 2022 (not 6 April 2022, as originally proposed) and will apply where members or other scheme beneficiaries have rights to flexible benefits (broadly, defined contribution or cash balance benefits). Trustees will be required to facilitate an appointment with Pension Wise if a member, aged 50 or above, wishes to access their flexible benefits or transfer to another scheme with the intention of accessing their benefits flexibly. Members will need to confirm to the trustees that they have taken guidance or opted out of taking guidance, before the application to receive benefits or to take a transfer can proceed. The DWP has made a number of amendments as a result of its consultation, including clarity around the timing of when the nudge can be given, the steps that trustees should take to facilitate guidance appointments and the format of member opt-outs. Trustees should discuss the practicalities with their administrators and seek legal advice on any points of interpretation. According to a recent blog by David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at The Pensions Regulator (TPR), “guidance and pensions should go together like fish and chips”. Mr Fairs encourages trustees to prepare for the introduction of the “stronger nudge” and confirms that TPR aims to produce guidance before the new duties come into force.
Pensions Minister, Guy Opperman, has confirmed in a letter to Rt Hon Stephen Timms, chair of the Work and Pensions Select Committee, that he does not believe it is appropriate for the DWP to amend legislation so that individual pension savers would be referred to Pension Wise as part of a “mid-life MOT” when they reach age 50. The estimated cost of this would be £45 million – £80 million per year. The correspondence addresses a number of issues raised as part of the Work and Pensions Committee’s inquiry into “protecting pension savers, five years on from the pension freedoms”, the fifth report on which was published this week.
HMRC has published pension schemes newsletter 136. It contains further information about the increase in the normal minimum pension age (NMPA) from 6 April 2028, which is subject to Finance (No.2) Bill 2021 gaining Royal Assent. The newsletter clarifies that where the scheme rules currently give an unqualified right for a member to take their pension from NMPA "as defined in the Finance Act 2004", or make some other reference to the age permitted under legislation, that does not give an unqualified right to a protected pension age. The newsletter does note, however, that there may be some nuanced instances where professional advice should be sought. It further confirms that the 2028 protection framework does not apply in respect of the previous protection regimes where the existing provisions of the Finance Act 2004 will continue to apply, such as when NMPA increased in 2010. The newsletter also reports that some of the temporary COVID-19-related easements will be extended until 31 March 2024. HMRC has said that it will accept scanned relief at source forms (APSS105, APSS106, APSS107 and APSS590) until that date, provided certain conditions are met.
TPR says that failure to report scams is a failure to protect savers. TPR is urging pension providers, administrators and trustees to report suspected scams: "We’ve seen little evidence that the pensions industry is reporting its suspicions and this lack of data makes it difficult to accurately determine the scale of the problem and put in place successful interventions". Trustees should consider whether to update transfer processes to include a final step to notify TPR of any suspected scam.
In our next webinar, we will be considering practical governance considerations for pension schemes after deciding on their environmental, social and governance (ESG)/responsible investment policy. There will be a particular focus on how to prepare for and address challenges and enquiries from members and others. We are delighted that we will be joined by Marion Maloney, Head of Responsible Investment, at the Environment Agency Pension Fund. Registration on our website for the webinar being held on 17 February 2022 will open later this week. In the meantime, if you want a quick refresher on all things ESG-related, take a look at our #how2dopensions quick guides on ESG and publication of TCFD reports.