The Month In Pensions looks at the key developments in the UK pensions industry over the previous month. For May 2020, we focus on the accelerated pace of change in the pensions industry in an interview with Jason Coates and examine TPR's Annual Funding Statement, new guidance on COVID-19 and pensions and High Court cases on RPI / CPI. We also look forward to some of the developments to expect in June 2020.
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Ian Chapman-Curry: Hello, and welcome to the Month In Pensions for May 2020, brought to you by the pensions team at Gowling WLG.?
I'm Ian Chapman-Curry and I'll be looking at one of the main themes that has dominated the pensions industry in May before taking you through the key points of this month's main developments.?
We'll then take a look at what is coming down the tracks in The Month In Pensions in June 2020.
Theme for May 2020 - Accelerating the pace of change
For the last few months, we've hosted thousands of clients and industry professionals in events that have explained the complexities of a rapidly changing pensions landscape. No social distancing rules were breached, indeed, attendees may not even have left their homes. They might not even have left their pyjamas. Webinars are proving to be popular replacements for seminars, and they are now as easy to host and join as telephone calls.
This is just one small way in which COVID-19 has accelerated the adoption of technology in pensions. Trustee meetings have migrated online with many attendees being pleasantly surprised with progress in video conferencing. A large proportion of the pensions industry is working from home with limited adverse impacts. COVID-19 has tested business continuity plans, but, for the most part, it hasn't overwhelmed them.
How much of this will remain as a feature of how we work in pensions after COVID-19? This month, Jason Coates argues in a fascinating Insight that, instead of ushering in a new normal, the crisis has been the catalyst for an accelerated normal. Trends that were already evident before coronavirus have become much more apparent. Adoption of technology, use of artificial intelligence and the emergence of data-driven solutions are amongst the accelerated trends that have been identified.
It is unlikely that these developments will be ditched when we get back to 'business as usual'. Pensions dashboards, value for money and consolidation will, over time, create a very different looking pensions industry in the UK. Instead of craving a return to normality, we may instead need to get used to an accelerated pace of change.
This month's main developments
The Pensions Regulator issues new guidance on dealing with COVID-19 and pensions
The Pensions Regulator (TPR) has issued new COVID-19 guidance that covers dealing with members who request transfers, automatic enrolment and defined contribution scheme communications.
On member transfers, TPR requires a new template letter to be sent to all defined benefit members seeking Cash Equivalent Transfer Value (CETV) quotations. Schemes are also required to monitor the number of CETV requests received and watch out for any unusual patterns. The key message is that members should be kept informed of the steps being taken to continue running the scheme and should be warned not to rush into irreversible decisions when accessing or transferring benefits which they may later regret.
TPR's updated guidance document on automatic enrolment includes a new section on employer duties in respect of furloughed staff. This covers:
- enrolling employees who become eligible during furlough leave;
- automatic re-enrolment; and
- requests to join a pension scheme.
On defined contribution scheme communications, TPR notes that members are likely to be concerned about the fall in the market and individual fund values and sets out guidance on what should be included in any member communications being sent at this time.
The Pensions Regulator issues its Annual Funding Statement
On 30 April 2020, TPR issued its Annual Funding Statement for 2020 for defined benefit schemes. The statement identifies some of the key issues facing schemes with valuations in the period from 22 September 2019 to 21 September 2020 (i.e. Tranche 15). The statement also applies to schemes undergoing 'significant changes that require a review of their funding and risk strategies'.
TPR's key focus in the statement is the current COVID-19 pandemic. The statement emphasises the need for trustees and employers to work together to manage the impact of the pandemic, although TPR doesn't expect this to be at the expense of pension scheme security.
Whilst the statement is largely focused on the current crisis, it is still consistent with TPR's messaging over the last few years, encouraging a long term focus and ensuring pension schemes are treated fairly.
High Court deals with two cases involving switching from RPI to CPI
This month, the High Court has handed down judgments in two cases involving pension schemes looking to switch from using the retail prices index (RPI) to the consumer prices index (CPI) as a measure of inflation. The first case looked at the inflation index in respect of the revaluation of pensions and the second case for pension increases.
In the first, Carr, the High Court examined 'hard-coding' and highlights the need for caution in construing rules which mix RPI and statutory increase wording without being clear as to which prevails.
In the second, Ove Arup and Partners International Ltd, the High Court considered the circumstances in which an index would be regarded as having been replaced. The court's decision was based on a construction that was informed by the wider provisions in the relevant rule.
Both cases emphasise the long running point that the interpretation of provisions imposing an obligation to apply increases calculated by reference to an index requires careful, case by case analysis.
Interview with Jason Coates on the accelerated normal for pensions
The interview with Jason Coates is not set out in this transcript but you can get all of the information from the original Insight Will COVID-19 create a new or accelerated normal for pensions?
June 2020 in pensions
- 25 June 2020 - Finance Bill 2020: end date for Public Bill Committee proceedings - The Finance Bill 2020 will be considered by a Public Bill Committee. According to the House of Commons' revised programme announced on 27 April 2020, the proceedings must end no later than 25 June 2020.
- 30 June 2020 - The Pensions Regulator's deadline on reviewing COVID-19 easements for pension scheme trustees, employers and providers Part of The Pension Regulator's response to the COVID-19 pandemic was to grant several easements relating to legislative and regulatory requirements on pension scheme trustees, employers and providers. The Pensions Regulator is committed to reviewing these easements by 30 June 2020.
- 30 June 2020 - Automatic enrolment: seafarers and offshore workers regulations intended to come into force - Legislation under which seafarers and offshore workers continue to be subject to the automatic enrolment regime are currently expected to come into force on 30 June 2020.
And that is nearly all from The Month In Pensions for May 2020. We always finish off with a non-pensions recommendation - something a little lighter than reading the ECJ advocate general's opinion in a case involving both VAT and pensions.
Before we get to that, just a reminder that you can get in touch if there are any items you'd like to see covered in future episodes of The Month In Pensions - just contact me, Ian Chapman-Curry or find out more about our pensions team.
Please feel free to share the podcast with colleagues or anyone who might be interested in staying on top of developments in the pensions world.
Non-pensions highlight of the month
So, just to finish, my non-pensions highlight of the month has been a new podcast. It is called Wind of Change and it has an intriguing premise - an investigative journalist discovers that 1990 hit anthem Wind of Change by the Scorpions was actually written by the CIA.
I can't improve on their own description of it being a tale of spies, secrets and soviets. And tight leather pants. Listen now wherever you get your podcasts.
Thanks for listening and, until next time, I hope you have a great month in pensions.?
Originally published 26 May 2020
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