16 July 2020
- The Pensions Ombudsman has a busy year but continues to meet its targets
- GMP equalisation – data guidance issued
- Kickstart Scheme includes pension contributions
- Brexit and State Pension – six months on and no news
- Independent advice checking – new FCA register still some way off
The Pensions Ombudsman’s latest Corporate Plan (published on 14 July) shows that its services continue to be in demand but it is coping with the extra workload, partly due to the new procedures it has introduced over the last few years.
The Pensions Ombudsman has seen a 12% pa increase in written enquiries over the last three years and a 40% increase in telephone enquiries during 2019/20 compared to the previous year. Despite this the Ombudsman has comfortably exceeded most of its Key Performance Indicators, having just a slightly higher than expected backlog of open investigations more than twelve months old.
A lot of this success must be down to the ongoing implementation of its Casework Reorganisation Programme and Digitalisation Programme (including launching a new website in May 2020), both of which started in a previous year (see Pensions Bulletin 2019/38).
Three strategic aims are set out in this year’s Plan which cover: providing one centre for the resolution of occupational and personal pension complaints; supporting and influencing the pensions industry; and continuing to transform and improve the Ombudsman’s services and processes.
The Ombudsman also intends to introduce a new People Strategy sometime after August, and comments on how it has dealt with the Covid-19 pandemic and how it will continue to do so.
The increase in demand for the Ombudsman’s services continues to show how important it is and, stating the obvious, this is particularly true in these difficult times.
The industry group looking at practical issues regarding GMP equalisation has published guidance on the data aspects of a GMP equalisation project. This is a detailed and technical document and in recognition of this fact it starts with a non-technical overview providing some background to areas on which trustees will need to make decisions.
One of the key concepts in the paper is that of “Calculation Solutions” – essentially different techniques available in relation to pensioners’ and dependants’ pensions in payment to deliver the comparator pension and the resulting accumulations to date to establish any past underpayments. Four different approaches are put forward – “reconstruction”, “rollback”, “formulaic” or “forms” and “broad-brush”, broadly in decreasing intensity of data demands.
The paper also looks as some specific data issues and the workarounds that can be used, with a particular focus on obtaining the GMP of the opposite sex comparator. Here three methods are put forward – pro-rata, first principles (using validated contracting out earnings and dates), and via HMRC’s GMP checker service – with the pros and cons of each explored. The paper concludes with a lengthy schedule of the data that could potentially be needed for an equalisation project and a summary of the minimum data that could be used.
The significance of this paper is that it lifts the lid on the unbelievable complexity potentially involved in an equalisation project whilst at the same time giving an insight into the choices of approach that may be available. A particular strength of the paper is its permissive approach, recognising that one size definitely does not fit all when it comes to data approaches.
The paper should give added impetus to gathering the data required, generating comparator records and calculating past underpayments. But it is a challenging read, commensurate with the topic it is addressing.
The Chancellor’s summer economic statement was delivered to Parliament on 8 July. The only mention of pensions was in connection with the new Kickstart Scheme.
This scheme, at a cost of £2 billion, is intended to create hundreds of thousands of high-quality six-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment.
The funding available covers 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer national insurance contributions and – the pensions perspective – employer minimum automatic enrolment contributions.
The document is quiet on how this and other new initiatives announced on 8 July will be paid for, but further details on the Government’s plans “for a sustainable and balanced medium-term fiscal policy” will be provided at the next Budget.
In relation to the Kickstart Scheme, as the employer’s duty to auto-enrol only starts for employees aged 22 or over it appears that the group of new employees the Government will be paying employer contributions for could be quite narrow (notwithstanding that employees can choose to opt-in to auto-enrolment schemes from age 16).
The DWP has updated its guidance in relation to pensions and benefits for UK nationals living in an EEA State (which includes the EU27) or Switzerland. However, there is no progress to report in relation to mutual recognition with these states for those newly moving to such states from 1 January 2021 since the 24 January announcement (see Pensions Bulletin 2020/04).
Such individuals are not covered by the withdrawal agreement and the outcome of negotiations is awaited before the Government can set out what the arrangements (if any) will be on matters such as counting future social security contributions in the EEA and Switzerland towards meeting UK State Pension qualifying conditions and getting the UK State Pension uprated every year in the EEA and Switzerland.
It is good to see that the Government is seeking to maintain the current arrangements, but it seems that it will be a little while yet before we will know whether or not it has been successful.
It will be a little while yet before those processing DB transfer out requests on behalf of trustees can use an FCA register to check that the individual giving the necessary “appropriate independent advice” is authorised to give such advice. This is the implication of an announcement from the Financial Conduct Authority that it will replace its Financial Services Register with an enhanced register on 27 July 2020.
The FCA had intended to publish a directory containing data on certified individuals in March 2020 – this is now promised for “later this year”.
Until last December practitioners could check that an individual had the relevant permissions against the old Register. Since then, as a result of the FCA’s introduction of the Senior Managers and Certification Regime, whilst they have been able to continue to check the Register for details of the adviser’s firm, they have had to contact the firms and ask them to confirm that the adviser works for that firm or check an appropriate third-party directory. A one-stop check should hopefully be re-established before the year is out.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.