Pensions Bulletin 2020/44
Our viewpoint
29 October 2020
- DWP to legislate a “stronger nudge” for DC savers to take pensions guidance
- Pensions dashboards to go live in 2023?
- Job Support Scheme expanded – but pension contributions remain uncovered
- New Sole Trustee Code launched
DWP to legislate a “stronger nudge” for DC savers to take pensions guidance
The DWP has published a policy paper in which it sets out the actions it will now take to further encourage DC savers to access pensions guidance.
This comes nearly two and a half years after the Financial Guidance and Claims Act 2018 required the Government to legislate so that trustees of occupational schemes, in respect of flexible (ie typically DC) benefits, and the providers of contract-based DC schemes, ensure that individuals are referred to “appropriate pensions guidance”, are advised of the nature and purpose of such guidance, and have subsequently either received or opted out of receiving such guidance, where they are proposing to access or transfer their DC benefits.
Action is now being taken following results from the “Stronger Nudge” trials undertaken by the Money & Pensions Service recently (see Pensions Bulletin 2020/30), some of the details of which are set out in the DWP paper.
The DWP now says that the following will happen:
- Regulations will be drafted, based on certain principles, setting out details about how the legislation will be implemented. Consultation is promised on these regulations ahead of them being settled
- The “appropriate pension guidance” will be offered through the Pension Wise guidance service provided by MaPS
- The Pensions Regulator is expected to provide guidance for trustees to support them in implementing this change
The Financial Conduct Authority will introduce parallel rules to implement the nudge for personal pension and stakeholder pension schemes in due course.
The DWP has also published an interesting research report in which a number of individuals with DC savings in the 50 to 72 age range (oversampling those who had started their DC decumulation journey, but also including some who had not yet done so and a small group who were not yet able to) were asked four questions relating to their experiences and expectations on retirement income. One of these questions was about support in order for them to make decumulation decisions. A desire to have simpler and clearer information and guidance across all their pension pots in one place came across as a common theme.
Comment
Disappointingly no timescales are provided for this “stronger nudge” legislation, but ahead of the announcement, Guy Opperman promised Parliament that it would all happen “at the earliest opportunity”, so we hope that we will see the draft regulations shortly and the FCA will not be far behind.
Pensions dashboards to go live in 2023?
A six-stage “indicative programme phase plan” for the launch of pensions dashboards has been published by the Money & Pensions Service and it shows that dashboards are unlikely to be available to use until 2023. It is around this point that schemes and providers will begin to be compelled to make available data for the dashboard to access and it is hoped that a point sometime “from 2023” will be reached where the number of pensions being findable will be sufficient for dashboards to be of use to a critical mass of consumers. Quite when dashboards will be operating on a business as usual basis remains unknown.
The timeline, contained in the October 2020 progress update report of the Pensions Dashboards Programme (PDP) of M&PS, shows that ahead of a possible 2023 launch a “develop and test phase” is intended to take place from 2021 and a “voluntary onboarding and ongoing testing” phase will occur from 2022.
The first stage of the plan (Programme mobilisation) is now deemed to be complete and the PDP’s plans for the next six months include finalising matters in order to find a supplier to deliver the dashboards’ digital architecture, finalising requirements for identity verification and publishing the first iteration of PDP’s data standards.
Comment
The PDP stresses that this is an indicative timeline that will be further refined over the coming six months. As with all such projects the delivery date is dependent on a number of moving parts coming together, not least of which is the scaling up of the delivery team and the success of the procurement exercise yet to come. But there is a lot more to get to grips with, as the report sets out.
Job Support Scheme expanded – but pension contributions remain uncovered
The Job Support Scheme, announced on 24 September (see Pensions Bulletin 2020/40), in which the Government supports employer payrolls for part of the hours not worked by employees during the continuing pandemic, is being expanded in scope and generosity ahead of its introduction on 1 November. An HMRC policy paper provides further details.
The scheme to support those businesses that can operate but face decreased demand (now dubbed JSS Open) remains available for employees who are working for at least part of their normal hours, but the threshold for hours worked is reduced from one-third to 20% of normal hours (so those working one day a week should now be eligible).
In addition, employers will only have to pay for 5% of hours not worked, rather than the third previously proposed. The Government grant will consequently increase from a third of hours not worked (up to a cap of £697.92 per month) to 61.67% of hours not worked (up to a cap of £1,541.75 per month).
As before, impacted employees will not receive earnings for the remaining third of the hours they do not work. Under the revised scheme, employees at the 20% of normal hours threshold will earn 73% of their normal wages where the cap does not bite, whilst those who work at the previous one-third of normal hours threshold will still earn 77% of their normal wages where the cap does not bite.
The HMRC policy paper makes clear that the Government grant will not cover national insurance or pension contributions. NICs will remain payable by the employer and employee, not only in respect of hours worked, but also in respect of the Government grant and the employer contribution in respect of hours not worked. Employer and employee pension contributions must also continue to be paid in accordance with the applicable pension scheme terms.
The parallel self-employed grant is also being expanded.
In an earlier announcement the Job Support Scheme is also to be expanded to support businesses required to close their premises due to coronavirus restrictions – primarily those in the hospitality, accommodation and leisure sectors. In these situations (dubbed JSS Closed), the scheme will pay two-thirds of each employee’s salary, up to a maximum of £2,100 per month. NICs will remain payable by the employer (and presumably employee) but it is estimated that around half of potential claims are likely not to incur employer NICs or auto-enrolment pension contributions.
The Job Support Scheme is intended to operate for six months with a review point in January. Employers will be able to claim in arrears from 8 December 2020, with payments made after the claim has been approved. Further guidance on the steps that employers need to take to calculate and make a claim to the Scheme are promised by the end of October.
Comment
Earlier this year the Pensions Regulator published some useful guidance in relation to the interaction of the predecessor Coronavirus Job Retention Scheme with pension contributions. Now that this furlough scheme is being replaced by the Job Support Scheme it will hopefully update this guidance.
New Sole Trustee Code launched
The Association of Professional Pension Trustees (APPT) has launched a code of practice setting out standards for professional corporate sole trustees (PCSTs). The code, which comes into force on 1 January 2021, sets out a range of governance and risk controls to which those sole trustee firms accredited with the APPT must adhere.
Included is a requirement for at least two accredited professional trustees to be involved in PCST decision-making processes, as well as measures to ensure that PCSTs assess whether they should report to the Pensions Regulator if they are removed, or resign, from an appointment as a result of the sponsoring employer’s actions.
The code also sets out how accredited professional trustees should ensure that their firms adopt certain protocols to manage potential conflicts of interest for PCST appointments and maintain independence from the sponsoring employer. Firms also need to maintain due diligence procedures around PCST appointments, put in place measures to document how adviser appointments are made fairly and ensure that diversity and inclusion is taken into consideration in decision-making processes.
Comment
The code has been developed in consultation with the Regulator, following its decision this February to pursue the voluntary code avenue rather than make any changes to the way it regulates schemes that utilise a sole trusteeship model (see Pensions Bulletin 2020/06). It also builds on the standards for professional trustees published by the Professional Trustee Standards Working Group in February 2019 (see Pensions Bulletin 2019/08).