Regular round-up of the latest pensions, investments, trusteeship and scheme management news

Current Issues - December 2020

01 Dec 2020 - Estimated reading time: 8 minutes

See excerpts from this month's articles below (to read more, please download our latest Current Issues): 

GMP equalisation obligation extends to historical transfers

In the latest instalment of the Lloyds Banking Group litigation, the judge concludes that trustees must top-up past transfer payments if no provision was made for the need to equalise benefits for differences attributed to guaranteed minimum pensions.

No RPI reform before 2030; no compensation in prospect

Her Majesty’s Treasury (HMT) and the UK Statistics Authority (UKSA) have announced the outcome of their joint consultation exercise about reform of the Retail Prices Index (RPI). The Chancellor of the Exchequer will not consent to early implementation of the change that the UKSA proposes (essentially turning the RPI into a clone of the CPIH - the Consumer Prices Index variant that incorporates a measure of owner-occupiers’ housing costs); the UKSA is nevertheless expected to proceed with its reform in 2030, when it can do so unilaterally. The Government does not intend to compensate holders of index-linked gilts.

DB superfund guidance

The Pensions Regulator has published guidance for defined benefit (DB) trustees and sponsoring employers considering a move to a superfund. The guidance sets out the Regulator’s expectations and the approach that it will take to such transfers.

Options for indexation of public-sector GMPs

The Treasury is consulting on how it proposes to meet past commitments to public-service employees regarding the full indexation of public service pensions, including any related GMP element, following the introduction of the new State pension. It appears as though the current 'interim solution' (full indexation by the pension schemes) will almost certainly be extended, at least to cover those reaching SPA before 6 April 2024, to buy public-sector administrators time to deal with the fallout from McCloud and other court judgments before they have to grapple with the thorny issue of GMP equalisation. Whatever the Treasury’s decision, its effects will be felt beyond the budgets of central government departments: the costs of compliance will also fall upon Local Government Pension Scheme employers and even the sponsors of some private-sector schemes.

New Code for sole trustees

Under sole trusteeship the traditional board of trustees is replaced either with an individual trustee or, more commonly, a professional independent trustee company. The Association of Professional Pension Trustees (APPT) has published a new Code of Practice setting out a range of governance and risk controls to which it says it members who act as professional corporate sole trustees should adhere.

HMRC as a preferential creditor

A reminder that, in insolvency proceedings commenced on or after 1 December 2020, preference will be given to certain debts owed to Her Majesty’s Revenue and Customs (HMRC). This change may reduce the company assets available for distribution to creditors who rank lower in the priority order (and may also make it harder for solvent businesses to obtain financing).

Act soon - the Bill’s at the door

The Pension Schemes Bill is on the threshold of becoming an Act of Parliament, the only stages remaining being a back-and-forth ('ping pong') between the Houses of Commons and Lords to resolve any lingering disagreements, and Royal Assent. At the time of writing no dates had been set for these events. The Bill contains the basis for a new style of benefit provision (collective money purchase), raises the stakes for those inclined toward malfeasance by bringing in serious new criminal and civil sanctions, fixes roles and obligations in respect of the forthcoming pensions dashboards, supports the Regulator's impending shake up of defined benefit scheme funding, shines a (low-energy, long-life, carbon-efficient LED) spotlight on climate-change risk, and permits (nay, requires) trustees to reject fishy transfer applications. Specific details will in most cases be provided by secondary legislation (regulations). For more details of what is - and isn't - in the Bill on the eve of its debut, please read our most recent summary.


Furlough scheme extended (again)

The Chancellor of the Exchequer announced on 5 November that the Coronavirus Job Retention Scheme (AKA ‘furlough scheme’) will be extended until 31 March 2021 for all parts of the UK. Employers can claim 80 per cent of furloughed employees’ wages (capped at £2,500 a month) for hours not worked, but are responsible for paying the associated National Insurance and employer pension contributions.

Current Issues - December 2020


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